Xiaomi Postpones Mainland CDR Offering

Morning Report: Xiaomi will delay its CDR offering at the Shanghai Stock Exchange, while its Hong Kong IPO still runs on schedule.

China’s smartphone maker Xiaomi has announced that it will postpone listing its China depositary receipts (CDR) in mainland China until completing a separate IPO in Hong Kong. This decision came in right before its scheduled hearing with the China Security Regulatory Commission (CSRC) on its application for CDR, potentially forfeiting (link in Chinese) its opportunity to be the first domestic company that releases a CDR offering. CSRC soon replied (link in Chinese) that it “respects Xiaomi’s decision,” and cancelled the hearing.

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The company is reportedly targeting a valuation of $75 billion and is planning to raise around $10 billion from its public offering, but Xiaomi is not only in the spotlight for its large IPO volume. More importantly for Beijing, the company’s CDR offering, the first ever in China, is expected to set the trend for Chinese tech giants participating in the domestic exchange market.

Xiaomi itself did not specify any reasons for this delay. However, one source told the Chinese media outlet IFeng Tech that Xiaomi was possibly concerned about the flaccid performance of the domestic capital market. According to Reuters, the postponement may also be due to the worry that the CDR rules will not be finalized by the end of June.

It is worth noting that last Thursday the CSRC disclosed its first written feedback to Xiaomi’s CDR application. The commission inquired about the Xiaomi’s internet business qualification, its competition within the industry, and its corporate governance issues, among other matters. Some have speculated that the commission’s inquiry led to concerns over Xiaomi’s valuation and thereby its delay.

Xiaomi announced that it will “choose an appropriate opportunity” to move forward with a CDR offering in the future. However, it is unclear when the company will revisit this option.

After all, it is understandable that Xiaomi is hesitant to become the trailblazer of CDR, or the first person to eat a crab, as the Chinese would put it. However, Xiaomi’s move may add doubts to the future of CDR offerings of China’s other tech giants such Baidu, JD, and Alibaba.

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Illustration Credit: Li Anne Dias