Xiaomi to buy back 6 million shares as investors flee

The smartphone company’s share price has been dropping like a rock.

Image credit to Jon Russell. Licensed under CC2.0.

Amid a selloff of Xiaomi’s stock, the Chinese smartphone manufacturer announced Thursday that it will buy back 6.14 million class B shares at HK$9.76 apiece to boost confidence in the company.

At the time of publication, Xiaomi was trading at HK$10.06 per share.

Beijing-based Xiaomi has had a bumpy journey since the company went public on the Hong Kong Stock Exchange in July 2018. The stock was priced at HK$17 per share prior to listing, but closed at HK$16.80 on the day of its debut, giving Xiaomi a market cap of US$50 billion—only half the amount that it had hoped for. The stock’s price has been sliding since then. According to a Morgan Stanley report (link in Chinese), Xiaomi’s stumble has been due to a weak demand for smartphones in China and a sluggish outlook for the monetisation of its internet services, which include online finance and mobile games.

The company’s six-month lockup period expired on January 9th, so key shareholders, including cornerstone investors and company staff, are now able to sell their shares. Some have been doing exactly that, and Xiaomi closed on Wednesday with a market capitalisation of less than US$30 billion, or nearly a 43% drop from its peak.

Yuri Milner’s Apoletto Managers fund sold 594 million Xiaomi shares worth HK$6 billion as soon as the lockup came to an end. Bloomberg reported that an unnamed investor sold 231 million class B shares at HK$9.45 apiece to cash out at HK$2.18 billion.

More than 3 billion shares were unlocked for sale last week, amounting to around 19% of Xiaomi’s outstanding shares, according to data compiled by Bloomberg. The lockup period for controlling shareholders was originally due to expire in July, but has been extended by 365 days.

Editor: Brady Ng