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Xiaomi angling for $50B valuation in IPO next year

Xiaomi angling for $50B valuation in IPO next year

Xiaomi is looking to launch an IPO in Hong Kong next year to help it generate around $5 billion in funds for expansion.

The Chinese firm is hoping for a valuation of $50 billion. It was previously considered the world’s most valuable start up, but more recently has had to contend with strong competition from rival Chinese firms Huawei and Oppo.

To deal with this pressure, Xiaomi has looked overseas, stepping up its activities in India. It is considering an investment into relative newcomer Reliance Jio as part of a planned $1 billion investment into India across the next five years.

Xiaomi’s founder Lei Jun confirmed that the company aimed to “transplant China’s business ideas into other countries”, adding that this strategy had proven successful in India: “After only three years, we’ve become number one.”

The handset manufacturer is looking to extend its strategy to markets such as Russia and Indonesia, with the stated goal of shipping 100 million smartphones worldwide in 2018 – up from its target of 90 million in 2017. It is looking to expand its efforts in the USA, where until now it has only sold wearable devices aimed at the personal fitness market.

If Xiaomi’s proposed IPO goes ahead, it would be the largest tech firm to list publicly since fellow Chinese company Alibaba, which generated $25 billion via an IPO on the US Stock Exchange in 2014. The retail giant was valued at $231.4 billion.

While some financial institutions has expressed doubts over whether Xiaomi will reach its target $50B valuation, it has not been ruled out.  Keith Pogson, a senior partner for Financial Services (Asia Pacific) at EY, said that the “market is hot for tech companies, especially tech companies with China ties”, and noted that $50B was not a “preposterous” valuation.

Analyst Richard Windsor meanwhile noted that  “the comparisons to the torrid time [Xiaomi] had in 2016 are really easy as after Q2 2018, growth is likely to slow substantially as the comparisons to the previous year will become much more challenging. Consequently, sometime in H1 2018 is the perfect time to achieve the best possible IPO price as growth will then be at its highest.”

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