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Xiaomi landmark falls short

The first dual-class deal in Hong Kong; the intended first Chinese depositary receipt: Xiaomi’s IPO was not short of landmark intentions, but only some were delivered.


Brochures on the IPO of Xiaomi

The $4.72 billion IPO of Xiaomi marks a disappointing start to listed life for a company whose Hong Kong listing was supposed to be a landmark for the company, the exchange and the sector.

It priced at the bottom of the range, delivered half the valuation the company originally sought and was accompanied by mis-steps and confusion, which caused the company to axe a planned simultaneous secondary listing on the mainland.

Whatever the outcome, Xiaomi is the most notable IPO in Hong Kong for years, and for reasons beyond an originally mooted size of about $10 billion, which would have made it the biggest IPO in the world since Alibaba in 2014.

Of greater significance are two other structural points: one, that it is the first deal to use the new dual-class share structure permitted by the Hong Kong Stock Exchange specifically to attract listings such as this; and two, that it was intended to be the pioneer for Chinese depositary receipts (CDRs), a newly launched secondary listing mechanism on the mainland. The fact it failed to deliver the second was instructive in its own right.

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