Tuesday, 12 December 2017

Xiaomi seeks $50 billion IPO valuation

By Chris Kelly, Total Telecom
Wednesday 06 December 17

The Chinese smartphone giant is seeking a valuation of $50 billion to launch a potential IPO in 2018

Chinese smartphone manufacturer Xiaomi could be about to enter talks with investment banks regarding a potential $50 billion initial public offering (IPO), according to press reports. While the exact value of the IPO is still up for debate…

Chinese smartphone manufacturer Xiaomi could be about to enter talks with investment banks regarding a potential $50 billion initial public offering (IPO), according to press reports.

While the exact value of the IPO is still up for debate, a report by Reuters put the figure at between $50 billion. In 2014, Xiaomi was valued at $46 billion. Some analysts believe that this valuation could be a little top heavy.

"The most we would be willing to even remotely consider paying for Xiaomi would be double Apple’s EV / EBIT multiple which would give a valuation of $31.3bn, some 37% below the mooted $50bn.To get to $50bn, Xiaomi would need to put up EBIT margins of at least 8.0% which is a stretch given the company’s strategy of selling great hardware at good prices," said Richard Windsor, analyst at Edison Investment Research.

Despite posting some very positive figures this year, Windsor believes that Xiaomi will struggle to reach the mooted valuation figure of $50 billion, making the possible IPO unlikely.

"We suspect that its lack of profitability will keep it from going public until it is capable of putting up much bigger profit numbers,” he added. 

Xiaomi has seen rapid growth in recent years, particularly in Asian markets. The company recently announced plans to invest $1 billion in the Indian telecoms sector, as it looks to diversify its business out of the saturated Chinese market. The company is also looking at opportunities in Indonesia and Russia.

Xiaomi has not yet issued a statement regarding the potential IPO, but a spokesperson told journalists from Bloomberg that the company would not comment on IPO matters.

 

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