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These reasons make US investment institutions less interested in Xiaomi IPO

via:博客园     time:2018/7/9 9:35:44     readed:339


Tencent Technology News, on July 9, Xiaomi company stock will be listed on the Hong Kong Stock Exchange, the capital market will give Xiaomi the most accurate and reasonable market valuation. According to the latest news from foreign media, from the roadshow situation of Xiaomi in the United States at the end of last month, US investors are not interested in Xiaomi’s initial IPO. Many investment institutions do not understand Xiaomi’s business. A foreign media pointed out that in the future, Xiaomi needs to make some efforts and gain recognition from US investment institutions.

The United States is the world's largest capital market, and a large number of Chinese technology companies choose to list on the New York Stock Exchange and the Nasdaq Stock Market. Many well-known Chinese technology companies are also the focus of the US media. However, this time Xiaomi chose to be listed on the Hong Kong Stock Exchange of China.

According to CNBC, the US financial news media, at the end of June, Xiaomi’s team arrived in the United States for a roadshow for the first IPO. Xiaomi promoted his stock and corporate business model to some potential investment institutions.

In the view of some US investment institutions, Xiaomi is considered to be “China's Apple”, but apart from this, they do not know more.

It is reported that more than 50 hedge funds and mutual funds in the United States participated in the road show of Xiaomi. An investor who participated in the roadshow revealed that many investors present at the scene lacked sufficient understanding of Xiaomi. The information they had was that Xiaomi was a large-scale smartphone manufacturer.

Among Xiaomi’s total revenue, smartphones accounted for 70%, but Xiaomi’s fastest growing business is connected devices, including smart TVs, home routers, electric scooters, and air purifiers. The Internet of Things and consumer electronics products of Xiaomi increased by 89% last year and accounted for 21% of the company's total revenue.

In addition to mobile phones, televisions and other hardware, Xiaomi also has another Internet business, including the built-in software store, web browser, online music service. Last year, revenue from the Internet business segment increased by half to $1.5 billion.

In the past, a large number of media reported that Xiaomi had hoped to obtain a valuation of US$100 billion, but it finally determined the issue price of HK$17 per share (the company's valuation was more than US$54 billion). The CNBC website pointed out that at the current issue price and valuation, investment institutions apparently regard Xiaomi as a hardware company rather than a high-margin company dominated by software and services.

The above-mentioned investors who participated in the road show said that many people in the industry did not understand Xiaomi's non-hardware business, such as Xiaomi's mobile phone software and MIUI mobile phone user interface (customized modification according to Google's Android operating system).

In addition, some investors in the United States directly compare Apple and Xiaomi, which ignores an important factor, that is, Apple's software and services are only for Apple's own hardware products, but Xiaomi's software and services can be applied to other brands of mobile phones. .

In the past two years, Xiaomi's gross profit margin has tripled, but last year's gross margin was only 13.2%. This gross margin is much lower than Apple's 38% and Google's parent company Alphabet's 57%.

In addition to business models, profit margins, etc., US investment funds have little interest in Xiaomi, and there are other reasons.

Kevin Landis, chief investment officer at Firsthand Capital Management Inc. (located in Silicon Valley, focusing on the technology industry), said that for US investment funds, Chinese companies are a challenging investment.

Landis said that the internal governance of many Chinese companies has made investment institutions feel “uncomfortable” and that investment institutions cannot fully and transparently understand the company.

Landis said that investment institutions have had certain doubts about the transparency of information on Chinese listed companies. He also mentioned that in 2011, Alibaba Group transferred Alipay business to an entity controlled by CEO Ma Yun, which affected Yahoo's capital value (Yahoo has always been Alibaba's major shareholder).

In the long run, whether Xiaomi will be able to gain the favor of the capital market depends on its business competitiveness. At present, Xiaomi faces many powerful opponents. In addition to well-known companies such as Apple, Huawei, Lenovo, Samsung Electronics, Xiaomi also needs to compete with low-cost mobile phone manufacturers in China, such as Vivo and OPPO.

Beginning on Monday, open market investors will see the Xiaomi stock trading for the first time. Landis said that he will pay attention to Xiaomi's stock and see if there is a situation that makes him "excited".

Four years ago, Landis once invested in the stock of Tencent in China. He noticed that the popularity of Tencent's mobile chat tool WeChat increased rapidly, which led to a sharp rise in Tencent's share price and even made Tencent the sixth largest company in the world by market value. .

Landis said: “When deciding whether to invest in a Chinese technology company, we must find some undervalued elements. ”

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