New investments a mark of confidence: Xiaomi’s Lei

Xiaomi Corp, whose shares are officially set to start trading today in Hong Kong after a $3.1bn IPO, said investments by billionaires such as Li Ka-shing, Jack Ma and Pony Ma are a mark of confidence they have in its management and workers.In a letter to employees sent via WeChat yesterday, chairman Lei Jun said Xiaomi will strive to move up one notch in rankings as the world’s No 3 smartphone maker and to have overseas markets account for more than half its revenue.“A successful listing is only the first chapter of Xiaomi’s story,” Lei said in the letter, adding the earliest venture capital investor who put down $5mn in Xiaomi has seen the amount grow 866 times in value. “Tomorrow, let us witness this great milestone together.”The debut of the Beijing-based company’s shares is scheduled just days after trade tensions between the US and China escalated into a tariff war on July 6. Following a tussle over valuation and overshadowed by the bilateral conflict, Xiaomi had scaled back its ambitions for the initial public offering and cut its valuation to about $54bn, or roughly half of the initial goal. It also scrapped plans to sell shares on the mainland after failing to satisfy regulators.The company is the first in Hong Kong to sell shares with a dual-class structure since the city changed its rules to allow founders to keep outsized voting rights. Xiaomi Corp’s debut is off to a bad start last week even before its shares officially start trading in Hong Kong.Some institutional investors saw bids as low as HK$15.40 on Thursday with no offers in grey-market trading, according to three people familiar with the matter. That’s 9.4% below the issue price. Others said the level was at HK$16.15 – a drop of 5% – though there were no firm offers either, according to Andrew Jackson, head of Japanese equities at Soochow CSSD Capital Markets in Singapore.Xiaomi priced its IPO at the bottom end of a range, cutting its valuation to about $54bn, roughly half of the smartphone maker’s initial goal. The company also scrapped a plan to sell shares on the mainland after failing to satisfy regulators. The debut comes as investors abandon Hong Kong equities amid concern over a US-China trade war.  Traders will be able to bet on further declines by shorting the stock on its first day of trading, according to the Hong Kong exchange operator. The company is the first in Hong Kong to sell shares with a dual-class structure since the city changed its rules to allow founders to keep outsized voting rights, although that means the stock won’t be included in MSCI Inc’s global benchmarks.After a sizzling 2017, Hong Kong’s tech listings have started to struggle. Ping An Healthcare & Technology Co’s May debut flopped after the retail tranche was 600 times oversubscribed. Razer Inc, a maker of gaming laptops and accessories, and online car-financing provider Yixin Group trade more than 50% below their November issue price.Retail investors failed to show much interest in Xiaomi despite the hype, but those who bought into the IPO may be able to flip their shares from tomorrow. Phillip Securities Group typically begins operating a grey market one trading day before the debut.