Xiaomi has reportedly cut down on its target valuation from the recently rumored $100 billion to between $55 billion and $70 billion after the company moved to postpone its initial public offering (IPO) in mainland China until after it launches its share offering in Hong Kong. According to a new report by Reuters, citing sources familiar with Xiaomi's IPO plans, regulatory issues over the valuation of Xiaomi's China depositary receipts (CDRs) have prompted the company's decision to put off its IPO in China.
Earlier last month, it was reported that the Chinese smartphone maker filed for an IPO in Hong Kong with a target valuation of $100 billion, with the Beijing-based company reportedly hoping to raise some $10 billion in funding as part of the IPO. The share offering is touted as the 15th largest of all time and the most valuable of its kind since Chinese e-commerce giant Alibaba went public in 2014. Industry analysts speculated that Xiaomi's IPO will lead to oversubscribed offerings as Hong Kong investors rely on heavy borrowing in order to buy as many shares of one of the world's most valuable startups as possible, which would restrain the local equity market. The latest report comes as no surprise since it was reported in April that Xiaomi was set to file for an IPO in Hong Kong with a target valuation of between $65 billion and $70 billion, though earlier reports suggested that Xiaomi was considering pursuing an IPO at the New York Stock Exchange but it won't likely materialize anymore after the Chinese firm was reportedly cleared earlier this month by the local stock exchange for an IPO in Hong Kong. The IPO itself will also be the first Hong Kong Stock Exchange listing with weighted voting rights, meaning Xiaomi will be issuing non-equal shares, supposedly so that founder and Chief Executive Officer Lei Jun maintains control of the company.
The company now plans to first launch its traditional IPO in Hong Kong before it proceeds with issuing any CDRs reportedly due to the fact that the rules meant to regulate them won't be likely completed by the end of this month, which would complicate Xiaomi's plan to launch its share listing in early July.