Chinese Depository Receipts Hit a Roadblock with Xiaomi’s Indefinite Delay

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Beijing’s plans to use Chinese Depository Receipts (CDR’s) to bring overseas-listed tech giants back to the domestic A-market have met with a major set back, after smartphone giant Xiaomi announced the indefinite postponement of its mainland offering.

Xiaomi has announced that it will postpone a mainland offering of its shares until after the completion of its IPO in Hong Kong scheduled for 9 July.

The smartphone giant was expected to become the first Chinese company to make use of CDR’s as a funding channel, after applying with China’s securities regulator to raise as much as 30% of its USD$10 billion Hong Kong listing via mainland investors.

Xiaomi has not outlined a timeframe for when the CDR issuance process would re-commence, or provided concrete reasons for the delay.

“We’ve had many rounds of discussions with the regulators and reached a consensus that to ensure the quality of our CDR issuance, it’s better that we go public in Hong Kong first,” said Shou Zi Chew, Xiaomi’s chief financial officer, at a press conference in Hong Kong.

According to sources speaking to Reuters the reason for the delay lies in disagreement between Xiaomi and Chinas’ financial regulators with regard to the valuation of the CDR’s.

CDR’s are a newly approved financial instrument that permit Chinese investors to obtain equity stakes in companies listed abroad via domestic bourses.

Beijing hopes that the launch of the instruments will help Chinese tech giants listed in the US or Hong Kong to return to the A-share market, to the benefit of domestic capital markets and China’s own tech sector.

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