Just three months ago, Xiaomiโs founder Lei Jun promised at a celebration banquet after the companyโs IPO that โinvestors who bought Xiaomi stocks on the first day of the listing will make twice as much money.โ These days, however, Xiaomiโs stocks are far from fulfilling that promise.
Since its mid-July peak, Xiaomi shares have fallen more than 40% while its market value has shrunk dramatically.
Shortly after its IPO on July 9, Xiaomiโs market capitalization briefly took over Chinaโs e-commerce platform JD.com rising to HK$443 billion ($56.4 billion) on July 11 breaking into Hong Kongโs top 10 companies. Xiaomiโs current market cap currently stands at HK$288 billion.
Xiaomi was listed in Hong Kong on July 9 for HK$17 rising to a peak of HK$22 shortly after. Yesterday (October 11), the companyโs stock plunged nearly 10% closing down 7.99% at HK$12.66. The Chinese smartphone makerโs stocks opened at HK$12.72 today.
The downward trend is not limited to the smartphone maker with many Chinese tech stocks facing a rout partly due to the US-China trade war. On Monday, Tencentโs stocks dropped to a 15-month low erasing almost a third of the companyโs market value ($216 billion) since its peak in January. On Wednesday, Alibabaโs stocks hit a 52-week low.
Xiaomiโs road to IPO, however, has been rocky even before the trade tensions. The worldโs fourth-largest smartphone maker priced an IPO that gave it a valuation of about $54 billionโhalf of what was originally hoped for.
The company makes 70% of its revenues from smartphones. This has caused concern if the company can compete with the likes of Apple and Samsung and whether it can continue to capture the market among low-priced competitors such as Oppo and Vivo.
Although Lei Jun boasted on Monday with the impressive sales numbers of its new smartphone model Mi 8โ6 million units since Juneโ Xiaomiโs overreliance on hardware has made investors jumpy. JP Morgan Chase recently reported that the companyโs mobile phone shipments were unlikely to increase significantly citing sluggish growth in demand.
To counter that, Xiaomi has been trying to reinvent itself as an online service provider. Since its IPO, the discussion of โwho is Xiaomiโ has many trying to compare it with Apple, some with Amazon, and some even with Muji after the company included sofas, vacuum cleaners, and underwear into its offerings.
Xiaomi also announced today that it will be relocating some of its staff from the capital of Beijing to Nanjing and Wuhan. The Wuhan office was set up last year as a โsuper R&D headquartersโ with 10,000 staffers.
The new move seems to fit into the overall makeover Xiaomi is going through. In September, the company announced plans to put younger executives in leadership positions. Lei Jun said that the company will be undergoing a series of internal restructuring. On top of the shuffling of top management, Xiaomi will establish 10 new business units: four internet business units, four hardware products units, a technology platform, and an e-commerce platform.
