Due to IPO costs, cultural similarities, market familiarity, and ease of communication for investors, many unicorn companies in the Mainland tend to be IPOs in Hong Kong. The rise of Chinese unicorns and the thirst for funding can inject a very considerable amount into the Hong Kong market. Increase and activity
Missed Alibaba four years ago, HKEx would not miss the IPO, Xiaomi, the world's largest technology startup company this year.
On April 30, the newly formulated “Consultation Summary of Listing System for Emerging and Innovative Industrial Companies” entered into force in Hong Kong Stock Exchange was deemed to be the biggest change in the HKEx for 25 years. It was reported on May 2th that Xiaomi is expected to be the fastest Submit the listing application on the same day, from the end of June to the beginning of July, and then consider taking the CDR (China ADR) listed in the Mainland. This will be the largest IPO in Hong Kong history, and it is also expected to become the world's largest new technology stock this year.
According to sources close to the Xiaomi IPO intermediary who disclosed to the First Financial Journalist alone, the current sponsors, investment banks, and potential investors generally accept that the current valuation is at least 70 billion US dollars. After the IPO, the market value of the millet exceeds 100 billion US dollars in the short term.
Millet rely on what high valuation?
In recent years, Xiaomi’s round of financing has almost always been 'triple jump'. At the end of 2010, Xiaomi completed a Series A financing of US$41 million with a valuation of US$250 million; in December 2011, Xiaomi Corporation received US$90 million. Financing, with a valuation of US$1 billion; at the end of June 2012, Xiaomi Corporation financed US$216 million, with a valuation of US$4 billion; after the financing was completed in 2013, Xiaomi’s overall valuation reached US$10 billion. The latest public financing information was 2014. The financing amount is 1.1 billion U.S. dollars and the valuation is 45 billion U.S. dollars.
At present, Xiaomi’s value in the end is high. The credibility of the rumors of the rumors in the market ranges from 60 billion US dollars to 100 billion US dollars. People close to the Xiaomi IPO intermediary disclosed to the First Financial Reporter that the sponsors, investment banks, and potential investors are common nowadays. Accept the current valuation of at least 70 billion US dollars, after the IPO in the short term the market value of more than 100 billion US dollars grasp very large. 'Lei Jun and his team experience is very rich, there are reservations when pricing, which makes everyone have money to make, for Behind the market value management left a lot of space. 'He said.
How to value millet? First look at its business model.
At the end of April this year, Lei Jun announced an important message: The consolidated after-tax net profit for the overall hardware business does not exceed 5% per annum. This news shocked the industry, and public information shows that in 2017, Apple's overall business net margin was 21.1%. Huawei's overall business margin is 7.9%. Even in the home appliances industry with a low net profit rate, Haier is 6.6%, and Midea is 7.7%, which is also higher than 5%.
Why did Xiaomi publish this information before the IPO? The first researcher of the Institute of Mobile Phones, Sun Yanqi, analyzed the reporter of the First Finance and Economics Bureau. This is actually Xiaomi's indication of the direction of future development to the outside world. It is not a hardware company, not relying solely on hardware to obtain major information. Profit, but an Internet company, which also helps the capital market to see the business model of millet.
Lei Jun once explained that Xiaomi is essentially an Internet company with mobile phones, smart hardware and IOT (Internet of things) platform as the core, which is the 'Triathlon' business model: hardware + Internet services + new retail.
In fact, from the beginning of Xiaomi’s founding, Lei Jun has always emphasized that Xiaomi’s hardware is close to the cost of sales and hardly makes money. But only talking about hardware is not necessarily a good 'story'. Whether the global smartphone shipments or the Chinese smart phone industry continue Negative growth, domestic mobile phone shipments in the first quarter of this year were only 87.37 million units, down 26.1% year-on-year, of which, domestic branded handset shipments fell by 27.8% year-on-year. But the good news is that 5G commercials are approaching, and overseas markets are even closer. Great opportunity.
From a hardware point of view, after going through the 2016 make up classes and the 2017 reversal, last year Xiaomi’s handset shipments reached 92.4 million units. From the third quarter onwards, they returned to the top four in the world. In the first quarter of this year, only Huawei and Xiaomi realized The year-on-year growth. In the Indian market, millet mobile phone has occupied the first place in the market share since the third quarter.
However, if Xiaomi is regarded as an Internet company that needs a massive user base, hardware is only an entrance. Actively controlling the cost-effectiveness of hardware profits will help Xiaomi quickly accumulate, expand its user base, bring high activity, and achieve high conversion efficiency. And continuous high retention rate of Internet user groups.
A copy of the Xiaomi Pre-IPO financing promotion materials that the First Financial reporter once obtained showed that daily active users of Xiaomi reached 132 million, and the average daily user usage time was 312 minutes (5.2 hours). Xiaomi’s 2016 earnings amounted to nearly RMB 1 billion. In the composition, 79% comes from hardware and 21% comes from internet service business. The net profit rate of hardware business is only 2.8%, while the net profit rate of internet service business exceeds 40%, mainly from games, advertisements, application distribution, etc.
'There is also room for the imagination of Xiaomi's home, especially at the point of new retail nowadays, including Xiaomi and its competitors are all in the layout. ' Sun Yanxi said that this is also the reason why the outside world has so much room for the valuation of Xiaomi. First, 'proposing its valuation methods: first, valuation based on internet companies (games, advertising, membership, etc.), and second, valuations based on the entire industry chain from mobile phones, televisions, boxes, and smart hardware. Third, as the valuation of new retail companies online and offline, it can be said that there is not much reference for Xiaomi’s model in China.
Widening channels for listing in Hong Kong
If Xiaomi does not come to Hong Kong in the end, he would be surprised. 'The same stocks have different rights, the Hong Kong Stock Exchange president Li Xiaojia publicly stated.
Starting on April 30 this year, the new rules of the Hong Kong Stock Exchange allow companies with different voting rights structures to list, permitting the listing of biotech companies that fail to pass the financial qualification test on the Main Board, and seeking Greater China and International that seek secondary listings in Hong Kong. The company has set up a new convenient secondary listing channel. This means that the special equity held by Xiaomi’s chairman Lei Jun etc. will use the voting rights cap for the same shares with different shares, ie, each special share equals 10 common shares. The right to vote. In other words, Lei Jun only needs to hold at least 9.1% of the special equity after the listing, and may own a controlling stake in Xiaomi.
Not only Xiaomi, Ant Financial may choose A+H (Shanghai, Hong Kong) to be listed at the same time in the future. Ma Yun also expressed the hope that Ant Financial will be listed on the A-share market in the future. Based on its existing fitness, the two markets will be listed at least. There is a theoretical possibility. And Li Xiaojia also said that he is confident that Xiaomi, Saudi Aramco and Ant Financial will be listed in Hong Kong.
According to Zhang Xiaoxia, representative of the Hong Kong Stock Exchange Beijing Representative Office, Hong Kong IPOs do not need to wait in line and are in the process of immediate report. The total listing process is controlled in about 6 to 9 months. 'Companies listed in Hong Kong have no priority system. Time has been reviewed, who will be listed on the first listing who can be listed first.
From the perspective of the industry structure of Hong Kong's new stocks in 2017, the share of technology, media and telecommunications industries in Hong Kong’s new shares was 18% in 2017, which was lower than the 19% in 2016. In the financial services industry, the proportion of the consumer industry also declined. The increase in the proportion mainly comes from traditional industries such as real estate and manufacturing. Real estate new shares accounted for 28% of Hong Kong's new stock market in 2017, ranking first.
Data from Deloitte shows that in 2017, Hong Kong will increase 161 new shares with a total financing amount of HK$128.2 billion. The number of new shares increased by 34% compared with 120 last year, but the amount of financing decreased by 34% compared with last year’s 199.3 billion. The main reason for the decline in the total amount is the lack of super-large IPOs.
It is worth mentioning that Zhong An Online, which was called “New Economy Sambo” by the Hong Kong market last year, has attracted a lot of attention both when it was published and when Yi Xin was listed. Among these, Zhong An Online is used by retail investors to subscribe. The public offering part achieved over-subscription of 392 times. The company's stock price had already doubled in less than half an hour after the opening of the company's listed shares on the first day of listing. The market value approached 100 billion Hong Kong dollars.
However, with the new regulations of the Hong Kong Stock Exchange, the Hong Kong market has become more attractive to overseas technology companies. Due to IPO costs, cultural similarities, market familiarity, and ease of communication for investors, the Mainland has a lot of independence. The horn beast company tends to be in Hong Kong IPO, the rise of the Chinese unicorn and the thirst for funding can inject a very significant increase and activity into the Hong Kong market.
In January this year, Tong Shihao, a managing partner of GGV, one of the millet investors, said in an interview with a CFO reporter that U.S. investors can understand that the number of Chinese Internet companies is limited and that they are hard to bet all China or all bets on Chinese Internet companies to diversify risks. 'Compared to the US market, we will see a large number of Chinese companies choosing to list in Asia in the future. IPOs in the Chinese mainland and Hong Kong will increase.'
Li Kaifu, the founder of Innovation Workshop, also stated that this is good news for investors, entrepreneurs and investment institutions. If CDR is settled again, it will be a good thing. TMT, biotechnology companies have better access to market, choose more, start A person can focus on innovation more securely and choose a capital market that better understands the value of the company.