Xiaomi Rumored to IPO in HK with an Evaluation of $70 Billion
According to Hong Kong Economic Times, Xiaomi is expected to become one of Hong Kong’s first listed companies featuring “same shares with different rights”, and will submit application for going listed in Hong Kong as early as the beginning of May. It will then consider going public in mainland China in the form of Chinese depository receipt (CDR).
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In recent months, some of Xiaomi’s shareholders have been selling shares, and the price of the shares shows that the company’s valuation is around $65 billion to $70 billion, which is a maximum of HK$550 billion.
Prior to this, a reporter from Beijing Business Today was first to report on the pre-IPO financing materials of Xiaomi in mid-March. The materials show that Xiaomi‘s valuation has reached $68 billion. If Xiaomi goes public in the fourth quarter of 2018, its market value should reach between $85.4 billion and $135.1 billion.
According to the financing materials, the number of Xiaomi’s daily active users has reached 132 million, with monthly active users at 165 million, and daily average usage time at 312 minutes (5.2 hours).
The materials also show that Xiaomi’s loss in 2015 was 980 million yuan ($156M), and its profit in 2016 was 913 million yuan ($145.3M). It is estimated that their profit in 2017 was 7.582 billion yuan ($1.2B), with a profit margin of 6.5%. By 2019, Xiaomi’s net profit is expected to reach 18.831 billion yuan ($3B). Xiaomi‘s net profit compound average growth rate from 2016 to 2019 would be 174%.
The composition of Xiaomi‘s 2016 revenue is 79 percent from hardware and 21 percent from internet services. The net profit margin in their hardware business is only 2.8%, while the net profit margin of their internet services business is over 40%. Xiaomi is increasing the proportion of revenue from internet services. Xiaomi‘s revenue for 2017 is expected to be $17.6 billion, revenue generated from hardware accounts for 68.3%. Revenue from internet services is expected to exceed revenue from hardware by 2019 when their total revenue would reach $38.2 billion.
The Wall Street Journal raised a question about whether Xiaomi should be regarded as a hardware company or an internet company. This is a question considering its valuation. The company’s current valuation is between $80 billion to $200 billion. Some people think that pursuing high valuation for an IPO can be a mistake.