Xiaomi‘s IPO is expected to go live on the Hong Kong Stock Exchange next month. The countdown has been a mixture of prospects and skepticism. The IPO is expected to be the largest in four years since Chinese e-commerce giant Alibaba Group Holding Ltd raised $25 billion in its 2014 debut in New York. Xiaomi has no doubt had a highly successful run lately, beginning from last year. That notwithstanding, it was reported recently that the tech giant’s valuation was reportedly scaled down from $100 billion around $70 billion.
There are reports that investors are still skeptical about the overall prospect of the IPO. According to a report covered by Reuters, some investors are also worried about Xiaomi’s profit margins, especially since the firm revealed that it will keep its profit margin at 5%. This is in addition to the slide in smartphone sales in China, Xiaomi’s biggest market. It must be noted, though, that Xiaomi’s supposed 5% profit margin doesn’t include profit from its software gotten from advertisement.
At some point, the company may have to change its focus on growth instead of profit since investors are only interested in the profitability of the venture. That could be challenged by Xiaomi’s growing focus on offline sales. The company is gradually expanding its brick-and-mortar stores locations and that is going to increase its operating costs thus eating into already thin profit margins. The IPO will likely go public in the first half of July if the company receive final securities approvals within the move next week. We’ll have to keep our fingers crossed expecting that the IPO lives up to expectations.