Xiaomi IPO Will Be Huge

Xiaomi IPO Will Be Huge

Some recent reports have suggested the IPO could put its valuation around $100 billion, but a person familiar with the company's plans to go public told CNNMoney that it would be lower than that.

The documents Xiaomi filed Thursday shed some light on its finances, showing revenue soared almost 70% a year ago to around 115 billion yuan ($18 billion).

The company also make other internet connected devices and home appliances apart from smartphones.

"We are building an open global ecosystem, and not a walled garden", said Lei, who with co-founder Lin Bin will continue to control the post-IPO company through a special class of shares.

The company said its revenue was 114.62 billion yuan (USD 18 billion) in 2017, up 67.5 per cent against 2016.

The third-largest phone maker in China and the fourth-largest worldwide, Xiaomi's filing is also a boon for Hong Kong's stock exchange, which recently loosened its rules to try and attract more companies to list there. The company has posted a net loss of 43.9 billion yuan in 2017 while the revenue increased by 67.5 percent past year. It could be the biggest IPO since Alibaba Group Holdings Ltd. raised nearly $25 billion in 2014.

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Xiaomi said in its IPO application the company would have a weighted voting rights (WVR) structure, or dual-class shares.

Founded in 2010, Xiaomi was the fifth biggest smartphone maker in the world previous year, shipping more than 92 million devices, according to research firm IDC. At its height, it raised $1.1 billion in venture capital and became the world's most valuable startup. Xiaomi, for the first time, has revealed its fiscal details to the public. Still, the company warns that its retail store operation requires a substantial investment, which may explain its losses.

Challenges persist: It's unclear if Xiaomi can really convince USA wireless carriers to sell its phones amid trade tensions with China. In India - the most promising market for Xiaomi - the intensified competition from the newbies, likes of Vivo, put the company on toes.

"If you think of China's tech companies, only a few have a real strategy to expand into the overseas market, and even less have the capability to scale up" globally, said Richard Liu, chief executive of early Xiaomi-backer Morningside Venture Capital. The wide spectrum of products includes air purifiers, rice cooker, wearables, electric scooter, Mi TV, Mi Drone and etc. Xiaomi said it registered a revenue of 23.5 billion yuan past year from its ecosystem.

Xiaomi said its gross profit margin for smartphones was 8.8 percent past year, which is much lower than the estimated profit margin of around 60 percent that Apple has for its flagship iPhone devices.

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