Xiaomi became the first company to apply for the issuance of the CDR Unicorn. On June 11th, the Securities and Futures Commission disclosed Xiaomi Group’s “public offering of depository receipts and listing” documents. The prospectus disclosed that CITIC Securities Co., Ltd. was the sponsor of the issue and the main Underwriters. At this point, Xiaomi became the first single applicant of the CDR pilot.
The prospectus clearly states that Xiaomi will use the domestic stock exchange as the main listing place.
According to the disclosure of the prospectus, 30% of the funds raised are used for research and development of core autonomous products, and 30% are used to expand and strengthen the ecological chain of major industries such as IoT and consumer products, mobile Internet services (including artificial intelligence), and the remaining 40%. For global expansion. The prospectus shows that Lei Jun has 55.7% of the voting rights for Class A and B shares held by Smart Mobile Holdings Limitied and Smart Player Limited. In addition, according to the voting power delegation agreement signed by other shareholders of the company and Lei Jun, Lei Jun actually controls another 2.2% of the voting rights and controls the issuer’s 57.9% voting rights, which is the actual controller of the company.
Lei Jun owns 57.9% of voting rights for Xiaomi
The prospectus shows that Lei Jun has 55.7% of the voting rights of Class A and Class B shares held by Smart Mobile Holdings Limitied and Smart Player Limited. In addition, according to the voting power delegation agreement signed by other shareholders of the company and Lei Jun, Lei Jun actually controls the other 2.2. % of voting rights, a total control of the issuer's voting rights of 57.9%, for the company's actual controller.
Smart Mobile Holdings Limited, controlled by Xiaomi’s CEO Lei Jun, holds 651.9 million shares, holding 31.1296% of shares, and is a major shareholder.
The company adopts a special voting right structure, in which the company’s shares are divided into Class A common shares and Class B common shares. When the voting rights are exercised at a general meeting of shareholders, each Class A common share has 10 voting rights, each Class B ordinary The stock has 1 voting right, but when voting on a small number of reserved matters clearly specified in the company's articles of association, there is only 1 voting right per share regardless of the type of stock.
After Xiaomi issued the IPO, Lei Jun and Lin Bin jointly owned all Class A ordinary shares of the company, Lei Jun and Lin Bin’s operations and management of the company and all matters requiring shareholders’ approval (such as major transaction issues such as the election of directors and reorganization of assets, etc.) Has a major influence.
Lei Jun Suspended RMB 9.83 Billion Equity Incentives Before IPO
In April of this year, all the shareholders of Xiaomi unanimously agreed to issue 63956919 Class B ordinary shares to Lei Mobile-controlled Smart Mobile Holdings Limited. The share-based incentives confirmed the payment of 9.83 billion yuan in shares and were charged to the current profit and loss.
The prospectus disclosed that the aforesaid issue resulted in a large share-based payment for the company in the second quarter of 2018 and full-year 2018. The equity incentive granted by Xiaomi would further increase the company’s expenses and may dilute the shares of existing shareholders.
5,500 employees will share a feast
In addition, the prospectus also announced an employee option incentive plan. As of May 1, 2018, the company’s employee options plan (including stock options and restricted stocks) involved more than 5,500 employees and had issued outstanding B shares of common stock. The total number of shares is 244.5 million shares, each par value of 0.000025 US dollars.
The Employee Options Plan 2012 stipulates that the employee must serve a certain number of years from the option grant date in order to make the stock options viable. The service life (ie waiting period) is generally divided into 1 year, 2 years, 4 years, 5 years and 10 years. There are no performance conditions attached to stock options as vesting conditions. Employee stock options with vesting rights can be fully or partially exercised after the company completes the qualifying listing or is approved by the board of directors at any time.
Millet Financial is gradually being stripped
Xiaomi Group intends to gradually manage the financial related business and intends to gradually restructure Xiaomi Finance. After the restructuring is completed, the financial related business will be held by Xiaomi Finance (Cayman Islands). The prospectus shows that as of the signing date of this prospectus, Xiaomi’s financial relations The business has been reorganized to Xiaomi Finance, which is a wholly-owned subsidiary of Xiaomi Group. Based on the future business development plan, Xiaomi Group intends to use equity incentives to gradually separate Xiaomi Finance as an independent entity. As of the signing date of this prospectus , Xiaomi Group provided millet financial restructuring loans of approximately USD 830 million and RMB 299 million respectively to Xiaomi Finance.
In the first quarter of 2018, Xiaomi Finance's income and pre-tax net profit accounted for 0.90% and 0.22% of the Xiaomi Group respectively. As of March 31, 2018, the total assets of Xiaomi Finance accounted for 13.55% of the Xiaomi Group.
Previously, the Beijing News reported that Beijing Xiaomi Payment Technology Co., Ltd., a subsidiary of Xiaomi Technology, had changed its legal representatives and shareholders on March 22, and the legal person was changed from Xiaomi CEO Lei Jun to Xiaofeng co-founder and vice president Hong Feng.
Internet service revenue accounted for 9.43%
The CDR prospectus issued this time compared with the previous prospects of the Hong Kong Stock Exchange. This prospectus adds financial data for the first quarter of this year and Xiaomi Finance will gradually spin off the contents of the group.
In the first quarter of 2018, compared to the 2017 annual report, the proportion of smartphone revenues declined further; however, the prospectus stated that the company’s smartphone sales accounted for a relatively high proportion of revenues, reaching 67.8%. The IoT consumer products, the Internet The proportion of service revenue has been expanded. The proportion of Internet service revenue increased from 8.65% in 2017 to 9.43% in the first quarter of this year. The globalization strategy is steadily advancing, and the proportion of overseas business is continuously increasing. In the first quarter of 2018, millet Sales in overseas markets accounted for 36.24% of the company's total revenue, a record high.
In the patent disclosure prospectus disclosure, as of March 31, 2018, Xiaomi’s patent reserve includes more than 16,000 patent applications under processing and more than 7,000 authorized patents, of which about 50% of the authorized patents are obtained overseas. The book disclosed that this year, Coolpad initiated a patent litigation to Xiaomi.
■ analysis
How is CDR priced? Different from A-share IPO
According to the disclosure by the Securities Regulatory Commission, investors' participation in CDR transactions will be compared with A-share trading methods, which will help ensure that the trading system is basically stable, and investors' trading habits will not change significantly. Technical systems do not need to make major adjustments to ensure stable transactions and strict compliance does not occur. The bottom line of systemic risk.
Previously, the Shanghai and Shenzhen Stock Exchanges and China Clearing issued a notice to start the CDR simulation test for various securities companies. It was announced that the basic design ideas of the CDR were mainly based on the A shares.
At present, the China Securities Regulatory Commission has not stipulated the entry thresholds for investors participating in the pilots, and only made requests for the appropriateness of investors from the perspective of investor protection. The specific business rules for such exchanges should be specified.
This also shows that the process of qualified investors buying and selling Xiaomi CDRs in the future is not significantly different from trading ordinary A-shares.
As of press time, the CSRC's disclosure of the Xiaomi CDR Proposal has not yet updated the CDR's pricing information.
Sun Jinyi, director of the New Era Securities Research Institute, issued a research report that it is expected that in Xiaomi’s issuance of 'H shares + CDR’, the price of CDR will be subject to the pricing of Hong Kong stocks, consistent with the pricing of Hong Kong stocks, in this case , The CDR's issuance pricing is distinguished from the A-share IPO pricing, and is not issued at a 23x P/E ratio. In addition, Xiaomi’s Hong Kong stock price will be pre-determined by the issuer and the underwriter within a price range, and will be based on the cumulative bids of international institutional investors. The situation ultimately determines the issue price.
In terms of CDR sales, Sun Jinyi believes that Xiaomi may issue a financing CDR this time, that is, to issue new securities to issue CDR, reference to HDR (Hong Kong Depositary Receipts) issued to account for 5%-10% of the underlying securities and TDR (Taiwan Deposit). The issuance of the trust certificate) accounts for approximately 7% of the underlying equity ratio. Sun Jinyi expects that Xiaomi's CDR will be equivalent to approximately 5% of its underlying securities (Hong Kong stocks).
In addition, referring to the strategic allotment of industrial wealth alliances, several agencies believe that Xiaomi CDR's placement process will be similar to that of Industrial Fulian, and there will be a corresponding lock-up period on strategic allotment shares and some offline delisting shares.
Why did Xiaomi lead the CDR issue?
According to the disclosure by the Securities Regulatory Commission, the CDR pilot companies are mainly oriented to meet the national strategy, have core competitiveness, and have high market recognition. They belong to the Internet, big data, cloud computing, artificial intelligence, software and integrated circuits, high-end equipment manufacturing, bio-pharmaceuticals, etc. High-tech industries and strategic emerging industries should be innovative enterprises that reach a considerable scale.
The financial indicators clearly require: First, red-chip companies that have been listed overseas, the market value of not less than 200 billion yuan. Second, innovative companies (including red-chip companies and domestic registered enterprises) that have not been listed overseas, operating in the most recent year The revenue is not less than RMB 3 billion, and the valuation is not less than RMB 20 billion; or the income is growing rapidly, with independent research and development, leading international technology, and a comparative advantage in the competition with the industry.
From the perspective of financial indicators, Xiaomi’s audited main business income in 2017 was not less than RMB 3 billion, approximately RMB 114.6 billion, and the company conducted the second, third and fourth round of the F round in the reporting period. Sub-financing, financing valuation of not less than 20 billion yuan, in line with CDR's corresponding policies.
According to the prospectus, in the first quarter of this year, millet's operating income was 34.412 billion yuan, operating net profit was -6.66 billion yuan, and net profit attributable to shareholders of the parent company was -7.005 billion yuan, net profit attributable to ordinary shareholders of the parent company after deducting non-recurring gains and losses 10.38 100 million yuan.
Since Xiaomi has its own VIE structure and different rights structure of the same shares, it does not meet the conditions for the issuance of common stocks directly on the A shares. Therefore, the issuance of CDR is an effective way for Xiaomi to quickly achieve the A share listing.
In the forecasts of securities firms, Xiaomi had been considered a hot 'starter'. For example, the five unicorns that CITIC Jiantou had predicted to meet the pilot conditions had previously been most likely to be launched by Xiaomi and Baidu, followed by Alibaba and Jingdong. And Netease.
On the evening of June 6, the Securities Regulatory Commission issued regulations and regulatory documents such as the Measures for the Administration of Depositary Receipts Issuance and Trading (Trial) (referred to as the 'CDR Scheme'). From the 7th onwards, qualified innovative companies can apply to the CSRC. The CDR issuance declaration materials will be delivered. On the 7th, the official website of the China Securities Regulatory Commission showed that the SFC accepted and accepted the application of the Xiaomi Group's “IPO Deposit and Listing” on the same day.
The reporter noted that Xiaomi used equity incentives to bind many employees and executives, which is also a major reason why Xiaomi leads the CDR distribution.