Xiaomi opened at HK$16.60, 2.4% lower than its IPO price of HK$17. Shares fell as low as HK$16 a share and were recently at HK$16.82. The broader Hang Seng Index rose 1.6%.
The stock that was made available to retail investors drew orders represented 9.5 times the shares offered, the company said Friday. That is far short of the oversubscription rates for other tech IPOs in Hong Kong. Orders for a separate block for foreign investors only slightly exceeded the amount offered.
Xiaomi’s debut comes at a challenging time for Chinese stocks as investor sentiment has been hurt by an escalating trade conflict with the U.S. Last month, Shanghai’s key index entered bear-market territory—meaning a 20% drop from its recent high—and Hong Kong’s benchmark is down more than 10% from a January peak.
“Investors are skeptical about Xiaomi’s growth momentum as the global smartphone market seems to be on a downward slope,” said Jacky Zhang, an analyst at BOC International in Shanghai.
Xiaomi is one of China’s top makers of cheap yet stylish smartphones and other consumer gadgets. Founder and CEO Lei Jun hopes the IPO can fuel more international expansion after the company previously pushed into India, Southeast Asia and Europe. Eventually, it would like to sell phones in the U.S.
Yet Xiaomi stumbled in the lead-up to the flotation. It tried to position itself as an internet company instead of a pure maker of gadgets, in the hope that it would garner a higher valuation.
Investors were skeptical, and the eight-year-old company ultimately priced its IPO at the bottom end of expectations. The $54 billion valuation was well below not only early projections of $100 billion, but short of several analysts’ estimates of $65 billion to $85 billion.
“Hong Kong investors have never seen something like this before,” said Hans Tung, managing partner at GGV Capital and an early investor in Xiaomi, at the stock exchange’s listing ceremony on Monday. “Hong Kong investors need time to get used to the story, just like U.S. investors took time to get used to Facebook . ”
The company is the first to list in Hong Kong with supervoting shares under new rules implemented by Hong Kong Exchanges and ClearingLtd.