Everything not well for Xiaomi even though it goes public

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Xiaomi’s public debut was supposed to value the Chinese gadget maker at $100 billion and set the stage for a global coming-out party for some of China’s most successful technology companies.

When Xiaomi finished its first day of trading on Monday, the company was worth only $48 billion, weakness that could hang over the rest of the Chinese tech players waiting to go public.

China has enjoyed a long-running technology boom that has put it on a par with Silicon Valley in terms of money raised and fortunes made. But lately, China’s economy has shown signs of slowing growth.

“At this critical moment in Sino-US trade relations, the global capital markets are in a constant flux,” Xiaomi’s founder and chairman, Lei Jun, said to a group that included Xiaomi employees at the Hong Kong Stock Exchange early Monday.

Xiaomi is widely expected to be the first of several big Chinese tech names to seek initial public offerings in coming months. They include Didi Chuxing, China’s version of Uber; Ant Financial, the financial affiliate of the Alibaba Group; and Meituan-Dianping, an online delivery service for food and products.

Though the Xiaomi founder cited trade, investor concerns about the company’s plan played a big role in its disappointing debut.

In recent months, as Xiaomi bankers and executives travelled around the world to meet with prospective investors, they pitched Xiaomi as an Internet company and China’s answer to Apple. It was a formula — China plus Internet — that in the past guaranteed strong support from overseas investors like hedge fund managers in the United States.

But many investors view Xiaomi as still largely a hardware maker, not an Internet company. It has promised fatter margins from selling Internet services to its smartphone users, but those services accounted for less than nine per cent of last year’s revenue. Some investors were also concerned about Xiaomi’s focus on international growth, as its home market has become increasingly competitive. More than half of its sales are outside China, primarily in India, where it has a loyal following for its low-cost smartphones.

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