Xiaomi to Apply in May for Hong Kong Listing, Valuation Could Be Hit by Toxic Phones

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Smartphone giant Xiaomi Inc. is expected to apply for listing on the Hong Kong Stock Exchange as early as next month according to local media reports, yet valuations of the company could take a hit from a toxic phone scandal.

On 16 April the Hong Kong Economic Times reported that Xiaomi hopes to submit an application for listing in Hong Kong as soon as the start of May, and will subsequently consider the use of Chinese Depository Receipts (CDR)  to list on China’s A-share market.

According to China Economic Net current valuations for Xiaomi lie between USD$65- 70 billion, or just a third of previous estimates that the company was worth $200 billion.

Beijing-based Xiaomi was founded in 2010, and posted rapid growth following the release of its first smartphone product in August 2011, becoming the largest company in the domestic sector by 2014.

The company emerged as one of China’s billion dollar unicorns following its second round of financing in 2011, while by the fifth round of financing in 2014 Xiaomi was valued at $45 billion.

Xiaomi CEO Lei Jun put the value of his company at $200 billion in November 2017, a figure which was subsequently affirmed by investment banks.

Other observers have begged to differ, however, with the list of global unicorns released by CB Insights last September putting Xiaomi in at third position, with a valuation of $46 billion, while Hurun’s 2017 list of Chinese unicorns (2017胡润大中华区独角兽指数) valued Xiaomi at $30.7 billion.

Long-standing rumours of a public listing received impetus on 13 March, when Lei Jun resigned as chairman of Cheetah Mobile, in a move interpreted by analysts as part of preparations for a Xiaomi IPO.

An upcoming IPO could also take a hit, however, from a scandal involving the alleged use of toxic materials in the company’s smartphone cases.

A recent investigation by the Shenzhen Consumer Council has named Xiaomi as one of several leading mobile phone brands, including Apple, Samsung and Huawai, that use cases containing an excessive volume of harmful toxic substances.

These substances include polycyclic aromatic hydrocarbons, plasticisers and lead.

Xiaomi phone cases reportedly have a 0.17% plasticiser content, which is well ahead of the ceiling stipulated by the Shenzhen Consumer Council of 0.1%.

Xiaomi has since disputed the findings, pointing out that there are no state or industry standards for mobile phone cases in China, and that the EU benchmarks used by Shenzhen Consumer Council are not appropriate for smartphones, given that they are the standards applied to children’s products and cutlery.

Xiaomi said that it will engage in communications with the Shenzhen Consumer Council and further analyse the testing results, as well as continue to strengthen quality control.

According to Xiaomi the company has formulated its own specialist standards for mobile phone cases in accordance with China’s “Standardisation Law,” which has been approved by the quality supervisory authorities of Beijing’s Haidian district,

 

 

 

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