The news that Xiaomi is going to be listed for the first time on the stock market has been in the air for several weeks now. Although no official information has been released from the company, it has been strongly speculated as Lei Jun's company wants to ask for an evaluation of 100 billion dollars, which would translate into the biggest IPO since the time of Alibaba's e-commerce giant. It seems however that Xiaomi wants to stay down to earth and focus on a slightly lower rating.
Xiaomi points to the downside for its first evaluation on the stock exchange!
Slightly so to speak, because 10 - 20 billions of dollars less are certainly not a trifle. It is a report of the Wall Street Journal to indicate how Xiaomi wants to aim for a first valuation on the stock exchange of about 80 - 90 billions of dollars; in the same report they try to give also the possible reasons for this presumed choice.
The first, according to the Wall Street Journal, would be the lack of interest that users are having in the last period in technology companies. The fear is that a company like Xiaomi that produces smartphones will not be able to maintain its value in a declining market, thus resulting poco attractive to a possible investor. It should be emphasized however, that despite smartphone sales have dropped a lot for all manufacturers, Xiaomi is the only one, especially in China, which has managed to record a growing trend in this respect.
The second motivation provided by the American newspaper appears to be more plausible, as explained below.
Although Xiaomi has recently reiterated that it is not just a hardware company, it is undeniable that at the moment its core business is represented by the sale of smartphones and other devices of various kinds. So its revenues are so high, but profit margins, too in light of the company's recent wishes, are and will still be limited.
At present, therefore, a company that cannot be put on the same level as service companies such as Alibaba and Tencent, could turn out again poco attractive if it were to go public with an IPO of 100 billion dollars.
Personally, I agree with this second hypothesis very much. Xiaomi has from poco started offering services such as music and video streaming, and slowly others will surely arrive. There is still a long way to go to reach the level of the main competitors, so I would consider it wise the possible choice of the Chinese company to aim for a lower IPO. What is your opinion?
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