A new report claims that smartphone giant Xiaomi could become the first enterprise listed outside of mainland China to issue Chinese Depository Receipts (CDR) in order to stage a return to the domestic A-share market.
Sources from the China Securities Regulatory Commission told IPO Zao Zhidao that Xiaomi plans to issue CDR’s on the Shanghai Stock Exchange on 16 July 2018, becoming China’s first CDR enterprise.
According to the source Xiaomi will delay its Hong Kong IPO by one to two weeks, in order to coordinate the pricing for both its listing and CDR issuance by 9 July.
CDR’s are a new instrument that permit domestic Chinese investors to obtain equity stakes in enterprises that are listed in outside jurisdictions via the Shanghai or Shenzhen bourses.
Beijing hopes that the launch of CDR’s will enable Chinese tech giants that first listed abroad, such as Alibaba and Baidu, to return to domestic bourses, giving a boost to China’s capital market as well as its hi-tech industry.
According to analysts Xiaomi could benefit from CDR issuance because Chinese A-share valuations are typically higher than those for Hong Kong stocks.
Enabling mainland retail investors to directly acquire stakes in the company should thus help to drive up prices for the company’s IPO.
Xiaomi’s mainland prices should also receive a boost from the fact that there are barely any major online companies on China’s A-share market at present.