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Xiaomi's Coming-Of-Age Year with the Tech World's Biggest Ever IPO in 2018

In an interview with Forbes, Simon Lee questions about Xiaomi's valuation of a potential mega IPO that "US$50 billion is too high when taking into account its sales performance and profitability. Comparing market capitalization versus revenue, it is not justifiable at all."

It's only been seven years since the launch of Xiaomi's first smartphone in August 2011. Now, the Beijing-based firm is getting ready to raise an eye-watering tech IPO of at least US$50 billion -- expected to be the biggest public listing the world has ever seen. That's double Alibaba's record-breaking offering of US$25 billion just three years prior.

Valued at roughly US$46 billion following its last funding round in 2014, Xiaomi became the most valuable private tech company at the time. Helped by its flash sales and savvy social media campaigns, the Chinese smartphone maker is at present the third largest unicorn just behind ride-sharing Didi Chuxing and Uber, according to data compiled by CB Insights.

After some ups and downs over the past couple of years, the company known as "Little Rice" in Chinese made some huge strides in 2017. Smartphone sales edged past Apple in its home market China in the second quarter, thanks to new models and its direct-to-customer sales method.

While a majority of Xiaomi phones are sold online--a sales channel strategy the company deployed early on--the opening of physical stores have accelerated this past year. The retail locations provide more touch points for consumers to get to know the product and to integrate after-sale services. Plans are to open 1,000 "Mi Home" venues by 2019--twice the count of global Apple stores. Xiaomi's founder and chairman Jun Lei believes that "new retail" combined with e-commerce will be the way to reach the target of shipping 100 million smartphones annually by 2018 -- a goal that he has set for performance.

Xiaomi has made significant inroads in India growing market share by over 290 percent in the third quarter of 2017 year-over-year. Market researcher IDC attributes the surge to brick-and-mortar expansion in Mi Homes, Mi authorized stores, as well as partnerships with major retailer.

In an interview with Forbes, Xiaomi's valuation of a potential mega IPO is questioned by Simon Lee, Senior Lecturer of School of Accountancy and Director of International Business and Chinese Enterprise program at The Chinese University of Hong Kong Business School. "My feeling is US$50 billion is too high when taking into account its sales performance and profitability. Comparing market capitalization versus revenue, it is not justifiable at all."

"But the timing couldn't be better from an issuer standpoint. Markets are still at their highs... the whole purpose of an IPO is to raise money," Lee adds... Read More

 

Media: Forbes

Section: Asia

Date published: 1 January, 2018

Re: Simon Lee