Xiaomi Corporation Announces Proposed Listing on the Main Board of The Stock Exchange of Hong Kong

Hong Kong: Xiaomi Corporation (“Xiaomi” or “the Company”, stock code: 1810) today announced details of its global offering (the “Global Offering”) and its proposed listing on the Main Board of The Stock Exchange of Hong Kong Limited.

A total of 2,179,585,000 shares (subject to the Over-allotment Option) (the “Offer Shares”) are being offered under the Global Offering, comprising an international offering of 2,070,605,000 Offer Shares (subject to reallocation and the Over-allotment Option) (the “International Offering”) and a Hong Kong Public Offering of 108,980,000 Offer Shares (subject to reallocation) (the “Hong Kong Public Offering”), representing approximately 95% and 5% of the total number of the Offer Shares, respectively.

The offer price (the “Offer Price”) is currently expected to be between HK$17 and HK$22 per Offer Share.

The Option Grantors and the Company expect to grant to the International Underwriters, exercisable by the Joint Representatives (on behalf of the International Underwriters), the Overallotment Option, which will be exercisable from the date of the International Underwriting Agreement until 30 days after the last day for the lodging of applications under the Hong Kong Public Offering, to sell up to 125,451,000 Class B Shares by the Option Grantors or issue up to 201,486,000 New Class B Shares by the Company, representing approximately 15% of the initial Offer Shares, at the same price per Offer Share under the International Offering, to, among other things, cover over-allocations in the International Offering, if any.

Goldman Sachs, Morgan Stanley and CLSA are joint sponsors, joint global coordinators, joint bookrunners and joint lead managers of the Global Offering.

Intended Use of Proceeds

Assuming an Offer Price of HK$19.50, the mid-point of the Offer Price range, and assuming the Over-allotment option is not exercised, the net proceeds from the Global Offering are estimated to be approximately HK$27,560.9 million after deducting underwriting fees and commissions and estimated expenses relating to the Global Offering.

The Company intends to use the proceeds from this offering for the following purposes:

• Approximately 30% for research and development as well as other efforts to develop the Company’s core in-house products, including smartphones, smart TVs, laptops, AI speakers and smart routers;
• Approximately 30% for investments to expand and strengthen the Company’s ecosystem primarily in the fields of IoT and lifestyle products and mobile internet services, including AI;
• Approximately 30% for global expansion, including but not limited to hiring local teams across business functions and investing in its retail partners; and
• Approximately 10% for working capital and general corporate purposes.

Weighted Voting Rights (“WVR”) Structure

The Company will have a weighted voting rights structure, effective immediately upon completion of the Global Offering. Under this structure, the Company’s share capital will comprise Class A Shares and Class B Shares. Each Class A Share will entitle the holder thereof to exercise 10 votes, and each Class B Share will entitle the holder thereof to exercise one vote. The Company’s WVR structure will enable the Company to benefit from the continuing vision and leadership of the WVR Beneficiaries, who will control the Company with a view to its long-term prospects and strategy.

Lei Jun, executive director, Founder, Chairman and Chief Executive Officer of Xiaomi said, “Today we present ourselves to you as we prepare to enter a new stage in our journey.

“We are an innovation-driven internet company committed to the principle of ‘amazing products at honest pricing’. Leveraging our unique “triathlon” business model, we maintain excellent design and outstanding quality in our products, while pricing our products as close as possible to cost by selling them to users through highly efficient online and offline new retail channels. We then provide our users with a range of comprehensive and engaging internet services.
“Xiaomi’s achievements so far illustrate the strength and resilience of our model. Within seven years of our founding, our annual revenue exceeded RMB100 billion, achieving a growth rate that many traditional companies are unable to match.

“We believe that the potential of our global business is limited only by our imagination. With our unique ecosystem model, we have mobilized many like-minded entrepreneurs, and we are not only changing industries in China, but also elsewhere in the world.

“Fundamentally, the Internet is all about transparency, efficiency, and equality. We want to allow everyone to enjoy the benefits of technology. That is the goal that all Xiaomi employees and I are working tirelessly for.”

Overview of Xiaomi

Xiaomi is an internet company with smartphones and smart hardware connected by an IoT platform at its core. Xiaomi delivers its amazing products at honest prices to users through its highly efficient new retail channels, and then provides its users with comprehensive internet services. With these internet services, the Company is able to closely engage and interact with users on its platform, thus increasing user stickiness and monetization opportunities.

Xiaomi was founded in 2010 by a group of accomplished engineers and designers, under the leadership of Lei Jun, who believed that high-quality and well-designed technology products and services should be accessible to the world. The Company is built on a relentless pursuit of innovation and an unwavering focus on quality and efficiency.

Triathlon Business Model

Xiaomi’s unique and powerful “triathlon” business model comprises three synergistic pillars of growth— innovative, high quality and well-designed hardware focused on exceptional user experience; highly efficient new retail allowing for its products to be priced accessibly; and engaging internet services.

• Hardware

Xiaomi offers a broad range of hardware products developed in-house or in collaboration with its ecosystem partners. The Company strives to offer its products at price points that are accessible to the widest user base to enjoy broad adoption and high retention.

The Company curates a wide range of additional products by investing in and managing an ecosystem of over 210 companies, among which more than 90 companies focused on the development of smart hardware and lifestyle products to further drive brand awareness and traffic to the Company’s sales points. Xiaomi has built the world’s largest IoT platform with over 100 million connected devices, excluding smartphones and laptops, as of March 31, 2018.

• New Retail
  The Company’s highly efficient omni-channel new retail distribution platform is a core component of the Company’s growth strategy. Since inception, Xiaomi has focused on direct online sales of its products to maximize efficiency and build a direct digital relationship with users. Since 2015, the Company has significantly expanded its direct offline retail network, for example, through its self- operated Mi Home stores to broaden its reach and provide a richer user experience.
• Internet Services
  Xiaomi provides internet services to give its users a complete mobile internet experience. Compared to other internet platforms that acquire new users at high costs, Xiaomi leverages the sale of hardware to acquire users at a profit. In March 2018, Xiaomi had approximately 190 million monthly active users (“MAUs”) on MIUI, its operating system built on the Android kernel. The connectivity between its devices and the seamless integration between hardware and internet services enable the Company to provide users with better user experience. Furthermore, Xiaomi has a proven track record of developing killer apps. In March 2018, it had 38 apps with more than 10 million MAUs and 18 apps with more than 50 million MAUs, including the Mi App Store, Mi Browser, Mi Music and Mi Video apps. Xiaomi’s users spent an average of approximately 4.5 hours per day on their smartphones in March 2018.

Xiaomi’s Mi Fans

Xiaomi has a large and highly engaged global user base. Its users are differentiated by “Mi Fans,” a large global community of passionate users who are intensely loyal to the Xiaomi brand, are highly engaged on its platform and actively contribute feedback and feature ideas to the Company’s product development. As of March 31, 2018, over 1.4 million users had more than five connected Xiaomi products (excluding smartphones and laptops). Mi Fans are globally present across places such as India, Indonesia, and Spain. In addition, the Company benefits from its enthusiastic Mi Fans through their passionate word-of-mouth marketing, which minimizes the Company’s sales and marketing costs, and their constructive product feedback helps the Company constantly improve its products and services.

Global Opportunities

Since inception, Xiaomi has also successfully tailored its strategy internationally to new markets and is present in 74 countries and regions as of March 31, 2018. As the Company expands its business globally, it also has been able to achieve increasing profitability with revenue growth. In 2015, 2016 and 2017, 6.1%, 13.4% and 28.0%, respectively of total revenues were derived from sales outside of mainland China. The Company has also successfully achieved a foothold in key international markets. For example, it ranked number one in India in terms of smartphone unit shipments in the first quarter of 2018 and was also the top five in 15 markets, according to IDC.

The Company intends to leverage its strong execution abilities to localize its unique business model internationally. Outside of mainland China and India, it will focus on expanding operations in additional markets, such as Southeast Asia, Europe, Russia, and other regions.

Public Offer Timeline

The Hong Kong Public Offering is expected to commence at 9:00 am on 25 June 2018 and is expected to close at 12:00 noon on 28 June 2018. Allotment results and the Offer Price are expected to be announced or made available on 6 July 2018. Dealings in the Shares on the Main Board of the Stock Exchange are expected to commence on 9 July 2018, under the stock code 1810.

White Application Forms and Prospectuses of the Company can be obtained from designated branches of the Receiving Banks, Bank of China (Hong Kong) Limited, Wing Lung Bank Limited, Standard Chartered Bank (Hong Kong) Limited, and Hang Seng Bank Limited, and offices of the Joint Global Coordinators. Applicants can submit applications using the White Application Form or online via the designated website of the White Form eIPO service provider at www.eipo.com.hk. Applicants who would like the Hong Kong Public Offer Shares to be deposited directly into CCASS can also use the Yellow Application Forms or give electronic application instructions to Hong Kong Securities Clearing Company Limited via CCASS.