Smartphone manufacturer may make $10b in world's biggest IPO since 2014

Chinese mainland smartphone maker Xiaomi filed an application for its highly anticipated Hong Kong initial public offering on Thursday, in what could become the world's biggest flotation since 2014 and the very first listing under the city's new dual-class share system.

Xiaomi, the world's fourth-largest smartphone maker by shipments, timed its blockbuster offering with the financial center's new weighted voting rights system that took effect from Monday.

Though its prospectus to the Hong Kong Exchanges & Clearing Ltd on Thursday did not give any indication of the fundraising and valuation target, the Beijing-based company is reported to be seeking to raise about $10 billion, putting it on course to become the world's biggest IPO since Alibaba's $25 billion deal in 2014, and the largest in Hong Kong since AIA's $16.6 billion listing in 2010.

The offering is also said to value the company at as much as $100 billion, a valuation that would make Lei Jun, who founded Xiaomi in 2010 and currently owns a 31.41 percent stake, jump from 116th to 26th place in the Forbes World's Billionaires List, three spots higher than Wanda Chairman Wang Jianlin.

BOCOM International Strategist & Head of Research Hong Hao, however, said Xiaomi's valuation may be too high for the market to absorb the mega-sized deal, especially given that the city's equity market has suffered a monthslong liquidity crunch.

The company posted 67.5 percent growth in revenue to 114.6 billion yuan ($18 billion) last year. Despite notching up a profit of 491.6 million yuan in 2016, Xiaomi made a net loss of 43.9 billion yuan in 2017.

"As Hong Kong ups the stakes in its battle for 'new economy' listings with New York, which stole the city's much-coveted crown as the world's leading venue for IPOs last year, Xiaomi's offering comes as a big victory and huge boost for Hong Kong Exchanges & Clearing Ltd," said Fielding Chen Shiyuan, a Hong Kong-based Asia economist at Bloomberg Intelligence.

The operator of Asia's third-largest stock exchange by market capitalization spent years of effort to eventually overturn a ban on companies that have shares with different voting rights from going public in Hong Kong, an issue that caused the city to lose out on the historic Alibaba deal.

"With Xiaomi firing the first shot, more highly sought-after IPOs may lose no time to follow suit under the new dual-class share system, bolstering Hong Kong's ambition as a magnet for the hottest companies across the globe," Chen said.

After the market debut in Hong Kong, Xiaomi is said to be considering issuing Chinese Depositary Receipts, with CITIC Securities being picked to handle its CDR issue.

The company, which aims to take on Apple and Samsung, also formed a strategic partnership with Hong Kong-based conglomerate CK Hutchison Holdings in the city on Thursday, to bring its rich portfolio of products to CK Hutchison's more than 17,700 retail and telecommunication outlets around the globe.

Meanwhile, the benchmark Hang Seng Index dropped 1.34 percent to finish at 30313.37 points on Thursday.

The Shanghai Composite Index edged up 0.64 percent to close at 3100.86 points, while the Shenzhen Composite Index advanced 1.12 percent to 10458.62 points.