Smartphone Giant Xiaomi's Stock Barely Moved Despite HK$200 Million Buyback Plans

In response to a sharp decline in its stock price, the company announced three share repurchase programs in less than a week.

Shirley Tian
    Jan 23, 2019 2:15 PM  PT
Smartphone Giant Xiaomi's Stock Barely Moved Despite HK$200 Million Buyback Plans
author: Shirley Tian   

Six months after the company's IPO, shares of the world's fourth-largest smartphone maker Xiaomi Corp. (HKEX: 1810) plunged to as low as HK$9.70 per share last Thursday, more than 40 percent below its HK$17 initial public offering price. 

In response, the company announced three separate share repurchase programs in less than a week. On Jan. 17, 18, and 22, Xiaomi cumulatively bought back roughly 20 million class B ordinary shares at an average price around HK$10 per share, 

"The board believes that a share repurchase in the present conditions will demonstrate the company's confidence in its own business outlook and prospects and would, ultimately, benefit the company and create value to its shareholders," Xiaomi said in the announcement published last Friday. "The board believes that the current financial resources of the company would enable it to implement the share repurchase while maintaining a solid financial position."

In addition, Chairman Jun Lei and some other senior executives have pledged not to sell their shares for another 365 days. It was previously due to expire in July.

Shares of Xiaomi, however, have barely moved since the company began buying its own stock. It closed at HK$9.97 per share in Hong Kong onWednesday, down 3 cents. 

After the Hong Kong exchange changed its rules to allow dual-class share structures, Xiaomi was the first company to take advantage of the new rules, selling $4.7 billion worth of shares.

The Beijing-based company initially expected to raise up to $10 billion, split between Hong Kong and mainland China, but later announced to shelve the mainland offering until after listing in Hong Kong. 

Cornerstone investors included U.S. chipmaker Qualcomm Inc. (Nasdaq: QCOM) and telecom service provider China Mobile Ltd. Li Kang Sing, the richest man in Hong Kong, Alibaba's Jack Ma, and Tencent's Pony Ma were among the top individual investors in this IPO.