Xiaomi Sees its Shares Falling More Than 40% Since its Peak

Xiaomi a few months ago went public but bad news and lawsuits are causing the company's share to plummet.

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Xiaomi debuted on the Hong Kong stock exchange in July this year and kicked off its long-awaited IPO. News of that first day with shares being traded publicly, however, is not very pleasant, and the company saw the value per share fell 6% in its opening day. The company set a market value of $ 54 billion – lower than the initial forecast of $ 100 billion.

The market already expected a negative debut of Xiaomi in the stock market. Reuters reports at the time that Xiaomi’s effort to position itself as an internet company is driven by the fact that device makers generally have lower stock market ratings. It is worth mentioning that 90% of the Chinese company’s revenue comes from the sale of equipment.

Small recovery

Xiaomi, the world’s fourth-largest smartphone provider, reported windfalls of 14.6 billion Yuan (2.1 billion US dollar) in its first announcement of results for the quarter ended in June, compared to a loss of 11.9 billion Yuan during the same period last year.

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However, the Q2 reports released in August show the reason why China’s company is currently ranked fourth in the smartphone market. Accounts for the second quarter of the year (Q2) show an impressive 68% increase over the same period last year, with revenue of approximately $6.6 billion and net income of $2 billion. Smartphones were largely responsible for this climb, with sales of 32 million units – an increase of 58.7% compared to the previous season.

Shares fall 40% since its peak

After a few months of Xiaomi’s exit on the stock market, it has presented a series of bad news, despite predictions in favor of the Chinese company, which promised that the value of the shares would rise without presenting any major inconvenience in its way.

It took us by surprise the fall of the value of the shares in the market in these months, which undoubtedly has surprised many shareholders.

The Xiaomi group shares have fallen to the lowest level reported to date, closing the price on Monday at HK $13.58 (USD $1.73), a significant difference compared to its initial price of HK $17 (USD $2.17), which means that its value has fallen more than 20%. At this moment, the company’s stock value stands at 340.726 billion Hong Kong dollars.

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To be specific, the Chinese company registered on the Hong Kong stock exchange on July 9 with an initial price of HK $17 (US $2.17). It was unexpected that the price had fallen by 2.35% already on the list, the opening price was HK $16.6 (US $2.12).

According to the information, the Chinese company plans to issue 279.585 million class B shares, of which 207.065 million are for the international market, representing almost 95% of the shares, while the rest are for sale in Hong Kong.

The planned offer price is HK $17 (USD $2.17), the fundraising is expected to be HK $37.05 billion. If this goal is achieved, Xiaomi will be able to increase the amount raised by HK $42.61 billion. An excess allocation option of 15% will be established. If exercised, the amount collected will increase to HK $42.61 billion.

In the beginning, Xiaomi grew fast. In 2013, it was said that it was worth 10 billion dollars and in December 2014, the company valuation was 46 billion dollars. It was spectacular growth, driven by astronomical sales although with few margins.

Restructuring makeover?

The company underwent a strategic change in 2016, after sales fell sharply, forcing it to break out of overseas markets. Since then, it has focused on offline sales and now generates approximately one-third of its revenue outside of China.

Many analysts see the phone market as very volatile, competitive and already quite crowded, so although these numbers are encouraging, Xiaomi plans to grow into different proposals, including alternative approaches to its handsets in other regions – such as the Pocophone F1, which targets India and Europe.

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As affordable prices are one of the great advantages of their cell phones – and this directly influences the profit margin of the company. The idea is also to move forward in other product and service sectors. In addition to the accessories it already produces, it plans to increase Things’ lifestyle and Internet lines, as well as smart TVs and portable PCs.

Xiaomi seeks to compete in the future more efficiently, looking for the company to survive with new talents and new ideas that new graduates can offer. As part of the plan, the company is reshaping its business and create new leadership positions aimed at creating a second tier under Chief Executive Lei Jun amid heightened scrutiny in governance and succession in companies of Chinese technology. Xiaomi will create two new departments to advise on Law on Strategy and oversee hiring, promotions and payments.

The internal restructuring of the Chinese manufacturer will also include the creation of 10 new business units divided as follows – four hardware units, four internet service units, a technology platform, and an e-commerce platform.

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