Xiaomi stock suffers two-day plunge as chairman Lei Jun’s pledge not to sell fails to deter tech bears
- Xiaomi’s shares have fallen by almost half since a high reached in July
A pledge by Xiaomi Corp’s major shareholders not to sell any of their stock in the Chinese smartphone maker for another year failed to stem a slide in the share price following the expiry of a six-month IPO lock-up on Wednesday.
Xiaomi’s shares fell 6.9 per cent to HK$10.34 on Wednesday in Hong Kong, extending a 7.5 per cent plunge the day earlier. A broader tech slump has wiped out more than half of the company’s market value since its July high. Investors who bought into the IPO at the issue price of HK$17 would lose money if they sold today.
Chairman and chief executive Lei Jun, together with Smart Mobile Holdings Limited and Smart Player Limited, the two largest shareholders of Xiaomi, had made the promise in a filing to the Hong Kong stock exchange Wednesday morning.
Lei’s voluntary promise to not sell his Xiaomi shares is “for the purpose of expressing their confidence in the long term value of the company,” Xiaomi said in the filing. Xiaomi’s chief financial officer Chew Shou Zi also made the same pledge not to see his company shares for another 365 days.
On Wednesday, about 19 per cent or more than three billion shares in Xiaomi became free to be traded after a six-month lock-up period. Xiaomi’s cornerstone investors include US chip maker Qualcomm and telecom operator China Mobile.
In a press conference in November, Lei said that “AI plus IoT is Xiaomi’s core strategy.”
Xiaomi has made some management changes, naming the head of its television business to become president of a new China region.
The company now derives 43.9 per cent of its revenue from overseas markets including India, Europe, Africa and the Middle East, where it has made significant expansion, according to the latest third-quarter numbers. Xiaomi has said that it wanted overseas business to account for 50 per cent of its total revenue.
At the same time, Xiaomi saw its domestic market share in smartphones slide to 13 per cent in the third quarter, down from 14 per cent a year earlier, according to Counterpoint Research.