Xiaomi just filed for the world’s biggest IPO since 2014

Xiaomi founder Lei Jun.
Xiaomi founder Lei Jun.
Image: Reuters/Jason Lee
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Chinese tech giant Xiaomi, the world’s fourth-largest smartphone maker, filed today (May 3) to go public in Hong Kong in what is expected to be the world’s biggest initial public offering since Alibaba’s $25 billion market debut in 2014.

It’s the first major company to announce plans to go public in Hong Kong after its stock exchange pushed through new rules to lure tech firms. While the filing didn’t say how much money Xiaomi is seeking to raise, it’s expected to be at least $10 billion, valuing the Beijing-based firm at $100 billion, according to multiple reports citing people familiar with the plan. That’s more than double what the firm was valued as recently as 2014.

Founded in 2010, Xiaomi first shot to prominence in China thanks to its tactic of selling almost all of its phones online at razor-thin profit margins.

After a challenging few years that saw a decline in smartphone sales, Xiaomi doubled down on offline retail with the opening of more than 200 Apple-esque retail stores across China while also branching into a wide product range of dirt-cheap internet-connected devices. It now sells everything from smartphones and fitness trackers to rice cookers and suitcases.

Xiaomi has also steadily expanded its overseas market—less than half of its phone shipments in the first quarter of this year were domestic, according to research firm IDC. The company has grown to become the world’s fourth-biggest smartphone brand in both market share and shipments by focusing heavily on India, its second-largest market behind China, according to IDC. In the last quarter of 2017, the firm said that Xiaomi was ahead of Samsung in India in terms of market share.

Founder Lei Jun issued a public letter (pdf, p.1) in the IPO filing emphasizing that Xiaomi is an internet company, rather than a hardware marker, meaning future growth will come from its internet-based services. The company already provides video subscriptions and a microlending service in China. And a day ahead of the IPO filing, the company debuted streaming apps in India.

Xiaomi’s IPO document unveiled many of its financial numbers for the first time. Its 2017 revenue surged by 67.5% to 114.6 billion yuan ($18 billion), with overseas sales more than tripling to 32.1 billion yuan. The company reported a net loss of 43.9 billion yuan in 2017, reversing from a profit a year earlier largely due to its issuance of preferred shares to investors and staff, a common pre-IPO financing option. Among Xiaomi’s biggest investors are Hong Kong-based Morningside Ventures and Yufeng Capital, the latter backed by Alibaba founder Jack Ma.

Last week, Xiaomi pledged to “forever limit” its net profit margin after tax for its hardware sales to a maximum of 5%. Smartphone industry analysts said there’s not much sacrifice involved when it comes to hardware—and the filings show its net profit margin for all businesses, in fact, is now at 4.7%.