Xiaomi’s Biggest Drop After Chartbusting Fundraiser

The Chinese multinational electronic company, Xiaomi Corp, succeeded in collecting the biggest top-up funding in Hong-Kong, amassing up to $3,91 billion according to the data collected from Reuters. This top-up fundraising surpassed the $2 billion sales in 2006 by CNOC, the largest offshore oil company from China. The $3,06 billion were collected by selling 1 million shares (HK $23.70 each), while the remaining $855 million is collected from selling a seven-year zero-coupon convertible bond. However, Xiaomi’s stock decreased by 12% on Wednesday (12/2) and it is considered as the biggest intraday loss since its 2018 listing. Nevertheless, Xiaomi’s shares have been one of the best-performing shares in Hong Kong, in which the value has increased by two folds since the beginning of this year.

Through their past performance, in 2018, Xiaomi (and its bankers) weaved a narrative about a company that produced devices for no profit in order to make money from a raft of services, including advertising which has turned people to think that this innovative business model could be warranted a $100 billion valuation. Meanwhile, the fact stated that only half of it was listed in Hongkong. Based on Xiaomi’s business model which is also as the core of its 2018 Initial Public Offering , it shows that the revenue only grew for 8.7% in the third quarter even though the monthly active users of its MIUI platform has climbed by 26%. Furthermore, the profit margins have also been shrinking although in fact, the main intention of Xiaomi is to convey that they are not just a phone maker at heart which in return they deserve a high price valuation whereas the results show that investors think differently. Currently, Xiaomi only relies on their smartphone sales, wherein a 45% increase in production occurred in the third-quarter shipments. The fierce competition between titan tech companies also forces Xiaomi to mainly sell to those investors that are willing to believe.

On Wednesday (12/2), stocks in Asia-Pacific had mixed outcomes. Responding to the decline of Xiaomi’s stock price, Hong-Kong’s Hang Seng index decreased by 0.13% or at 26,532.58. In line with Xiaomi’s decline in price, what pushed the Hang Seng index to fall even further was the adjacent drop of China Evergrande Group’s shares (by 2.53%). Contrary to the aforementioned, South Korea’s Kospi received a substantial growth of a 1.58% increase. Nikkei 225 and Topix also experienced an increase of 0.05% and 0.32% respectively. The growth of several indexes was partially credited to a few named United States-based indexes surging to record high where the S&P 500, Nasdaq, and DJIA rose by 1.1%; 1.3%; 0.63% respectively. IHSG has been getting stronger and is steadily progressing into the green zone after increasing by 0.52% to 5,755.1. This was also made possible due to positive sentiments from U.S. stimulus and the noteworthy news regarding the development of COVID-19 vaccines. All in all, we can see that the market is remarkably volatile, considering the fact that there are countless sentiments globally and/or domestically.

Sources:

Bloomberg

CNBC

Yahoo Finance

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