China’s Xiaomi raises $3.9 billion in equity deal

According to a term sheet seen by Reuters, Chinese smartphone maker Xiaomi Corp has secured a capital of $3.91 billion as part of a deal that includes Hong Kong’s largest top-up placement. Under this arrangement, the major shareholders place their existing shares with independent persons, then subscribe for additional new shares. Potential investors have been informed that the price should be set at HK$23.70 for the 1 billion shares that are being sold down in the deal, the term sheet reflected. Xiaomi did not immediately respond to a request for comment.

The price is at the lower end of the range decided by the company on Tuesday when it said the deal would be between HK$23.70 and HK$24.50. Xiaomi’s deal is the biggest top-up placement in Hong Kong to date, overtaking one by CNOOC Ltd which raised $1.9 billion in 2006 as reflected by the Dealogic data. The indicative price range is a 9.4% discount to Xiaomi’s closing price of HK$26.15 on Tuesday. Xiaomi witnessed a 19% jump in third-quarter net profit on Nov. 24, as the Chinese smartphone maker’s shipments soared up by 45.3% from a year earlier. Top shareholder Smart Mobile Holdings Ltd, which presides over ownership of about 27% of the company and is connected to Chairman Lei Jun, according to the term sheet, is selling the Class B type shares.

The company reported to have occupied a major market share in China and Europe as its rival Huawei Technologies’ supply chains are said to have suffered post U.S. sanctions. Xiaomi’s stock has boosted up 147.5% this year, which Aequitas Research analyst Zhen Zhou Toh said made the company expensive when assessed in relation to its major rivals. The placement, he said, was unlikely to flood the market with new stock. “Even though it is a large deal size by the absolute amount the deal only represents 4.7 days of average daily volume which should be fairly easy for the market to absorb,” he wrote on the Smartkarma platform.

According to Reuters, trading in shares of Xiaomi Corp was halted on Wednesday on the company’s request pending a statement, the Chinese smartphone maker said in a filing to the Stock Exchange of Hong Kong. The Hong Kong bourse had issued a notice of the suspension before the market opened but gave no details. The Beijing-based company reported that the shares were suspended pending an announcement regarding an issue of convertible bonds and placing of existing shares and top-up subscription of shares under a general mandate. No further details were furnished.

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