Chinese consumer electronics startup Xiaomi is planning to raise no less than $10 billion with its initial public offering that's widely expected to take place in Hong Kong over the coming weeks, Bloomberg reports, speculating that the move may leave the local equity market strapped for cash. As evidenced by the China Literature IPO from 2017, a high-profile stock market listing may prompt a significant portion of local investors to resort to heavy borrowing in order to commit to highly anticipated IPOs, usually resulting in oversubscribed offerings and a handicap imposed on Hong Kong's equity market estimated to be worth some $5.6 trillion.
Xiaomi is said to be pursuing a valuation of up to $100 billion, and even the most conservative estimates are suggesting the firm's IPO will be the largest tech offering since September of 2014 when Chinese tech giant Alibaba went public at a $167.6 billion valuation, raising $21.8 billion in the process of doing so. The Beijing-based original equipment manufacturer still hasn't commented on the matter in any capacity and its investor roadshow plans remain unclear. The company insisted it doesn't have any ambitions to go public until late 2017 when strong performance in India saw it revive its global operations which stagnated following a 2015 funding round, prompting it to reconsider the timing of its IPO. The fact that Xiaomi is now said to be pushing for a public listing suggests it doesn't expect its growth rate to continue spiking for much longer.
The firm is still prioritizing growth over profits, having recently made a symbolic pledge to never exceed a five-percent profit margin in the hardware segment. The move is being widely interpreted as a publicity stunt given how Xiaomi's hardware arm presently doesn't have a margin that's anywhere near that figure, whereas its much more profitable, advertising-serving software business wasn't encompassed by the same promise. Moving forward, Xiaomi is looking to bolster its existing foreign operations, expand to new markets, and try to bounce back in its home country where it's presently only the fourth-largest smartphone vendor behind Huawei, OPPO, and VIVO after enjoying a period of dominance.