Xiaomi's offer is Hong Kong’s biggest first-time share sale since September 2016,. REUTERS/Bobby Yip/File Photo
Xiaomi's offer is Hong Kong’s biggest first-time share sale since September 2016,. REUTERS/Bobby Yip/File Photo

Technology

Chinese smartphone maker raises $4.7bn in Hong Kong IPO

Billionaire George Soros and Chinese investment firm Hillhouse Capital were said to be among investors that placed orders for its shares

Bloomberg

June 29, 2018

Xiaomi and some existing investors raised $4.7 billion after pricing a Hong Kong initial public offering at the low end of a marketed range, a person with knowledge of the matter said.

The Beijing-based smartphone maker priced the sale of 2.18 billion shares at HK$17 each, the person said, asking not to be identified because the details are private. Xiaomi had offered the shares at HK$17 to HK$22 apiece. The pricing values Xiaomi at about $54 billion, roughly half the company’s initial goal.

Billionaire George Soros and Chinese investment firm Hillhouse Capital were among investors that placed orders for Xiaomi IPO shares, people with knowledge of the matter said earlier.

The offering is Hong Kong's biggest first-time share sale since September 2016, when Postal Savings Bank of China priced a $7.6 billion IPO, according to data compiled by Bloomberg. Xiaomi, led by serial entrepreneur Lei Jun, is the first major tech listing in Hong Kong since the city changed its rules to allow founders to keep outsized voting rights.

A Soros-backed fund placed an early order for a small amount of Xiaomi stock, according to one of the people with knowledge of the matter. Hillhouse placed an order of around $600 million, while US asset manager Capital Group placed an order for more than $500 million of stock, the people said.

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A price at the low end of Xiaomi’s IPO range translates into 22.7 times its forecast 2019 earnings, assuming a so-called over-allotment option is fully exercised, Bloomberg News reported earlier.

Representatives for Xiaomi, Hillhouse and Capital Group declined to comment. A representative for Soros Fund Management didn’t immediately respond to a request for comment. IFR reported the final pricing earlier Friday in Hong Kong, citing unidentified people.

Xiaomi had already scaled back its ambitions for the offering. Top executives were initially pushing for an IPO valuation of as much as $100 billion when listing preparations began last year, Bloomberg News reported at the time.

The company was also planning to raise funds from mainland Chinese investors nearly simultaneously with the Hong Kong IPO. It has since delayed the plan to float so-called Chinese depositary receipts in Shanghai, which reduced its overall fundraising target.

Goldman Sachs Group, Morgan Stanley and CLSA led Xiaomi’s IPO as joint sponsors.

The specs: 2018 Nissan 370Z Nismo

The specs: 2018 Nissan 370Z Nismo
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Engine: 3.7-litre V6
Power: 350hp @ 7,400rpm
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%3Cp%3E%3Cstrong%3EName%3A%3C%2Fstrong%3E%20WallyGPT%3Cbr%3E%3Cstrong%3EStarted%3A%20%3C%2Fstrong%3E2014%3Cbr%3E%3Cstrong%3EFounders%3A%20%3C%2Fstrong%3ESaeid%20and%20Sami%20Hejazi%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Dubai%3Cbr%3E%3Cstrong%3ESector%3A%20%3C%2Fstrong%3EFinTech%3Cbr%3E%3Cstrong%3EInvestment%20raised%3A%20%3C%2Fstrong%3E%247.1%20million%3Cbr%3E%3Cstrong%3ENumber%20of%20staff%3A%3C%2Fstrong%3E%2020%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%20%3C%2Fstrong%3EPre-seed%20round%3C%2Fp%3E%0A
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The squad traveling to Brazil:

Faisal Al Ketbi, Ibrahim Al Hosani, Khalfan Humaid Balhol, Khalifa Saeed Al Suwaidi, Mubarak Basharhil, Obaid Salem Al Nuaimi, Saeed Juma Al Mazrouei, Saoud Abdulla Al Hammadi, Taleb Al Kirbi, Yahia Mansour Al Hammadi, Zayed Al Kaabi, Zayed Saif Al Mansoori, Saaid Haj Hamdou, Hamad Saeed Al Nuaimi. Coaches Roberto Lima and Alex Paz.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”