Xiaomi, China-based smartphone and tech products manufacturer, has announced that it will postpone its application for a mainland share offering until after it completes a separate listing in Hong Kong.
The company, which is expected to raise about $10 billion in Hong Kong and mainland offerings, said it would apply to China’s securities regulator to postpone a review of its China depositary receipts (CDR) offering application.
Earlier this month, Chinese media reported that Xiaomi had filed an application to issue a CDR with the China Securities Regulatory Commission. The implementation of CDR allows domestic investors to hold shares of overseas-listed companies. Xiaomi was expected to be the first company to benefit from the mechanism, which underlines a dual listing of the firm both in Hong Kong and mainland China.
China Securities Regulatory Commission said in a separate statement that it would suspend the review of Xiaomi’s CDR application, but it did not give any further details. However, it could be related to the commission’s lengthy feedback in the form of 84 classified questions related to Xiaomi’s licenses on online business, ecosystem companies, risk disclosure, shareholding structure, R&D, etc.
According to the sources aware of the development, the decision to postpone the CDR tranche of its deal was taken in the early hours of Tuesday. One source says that the main reason for the postponement was that it appeared CDR rules would not be finalized by the end of June as expected.
While the company is postponing the CDR offering in the mainland, sources say that this would not affect the Hong Kong listing. Xiaomi has not yet said when it would restart its CDR application process or why it was postponing the mainland offering.
China has some rigid specifications for companies that want to issue CDRs on the Shanghai and Shenzhen stock exchanges, including market value, operating income, etc. According to the report, the Chinese firm is valued by its IPO sponsors between $65 billion and $86 billion.
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This decision of Xiaomi to pull CDR offering in mainland until after Hong Kong IPO is a big blow for Beijing which is trying to lure tech giants back home. Xiaomi was expected to be the trail-blazer of CDRs, designed to lure domestic technology firms to sell shares at home and give mainland investors access to the country’s leading tech firms.
