On the evening of December 1, it was first reported that Xiaomi group would issue 1 billion additional shares and issue $855 million of seven-year zero coupon convertible bonds.
Early in the morning of December 2, official propaganda did not wait, but the suspension of Xiaomi group came first. Xiaomi group issued a temporary suspension notice on the Hong Kong stock exchange, saying to be published on the issuance of convertible bonds under the general authorization, the allotment of existing shares and the subscription of old and new shares under the general authorization.
Xiaomi said in the announcement that it proposed to issue US $855 million of convertible bonds due in 2027, with a net proceeds of about $889.6 million from the issuance of bonds, and agreed to allocate 1 billion shares at HK $23.70 per share, resulting in net proceeds of about US $3.1 billion.
As for the use of funds, Xiaomi said that the funds raised were mainly used to increase working capital to expand business, invest to increase market share in major markets and invest in strategic ecosystem.
But the market doesnt buy much.
After the resumption of trading in the afternoon, the share price of Xiaomi group fell by 11% at one time, and the share price was as low as HK $23.1. By the end of the day, Xiaomi group fell about 7%, the largest one-day decline in nearly a month, closing at HK $24.3.
Castor Pang, a research director at jinghuashan in Hong Kong, said the operation of Xiaomi group was absolutely unusual, because other companies making placements usually issue official announcements soon after pricing.
At the same time, the Hong Kong Stock Exchange also requires a company to apply for suspension of trading if some of its inside information has been disclosed before it is officially disclosed. But oddly enough, on December 1, the day before the announcement, the company had already reported Xiaomis convertible bond and placement.
Controversial point: with 30 billion cash in hand, why does Xiaomi still need huge amount of financing?
On December 2, Bank of America Merrill Lynch released a research report, which lowered Xiaomi groups rating from buy to neutral, and its target price also dropped from HK $30 to HK $26.4, a 12% reduction.
BofA Merrill Lynch believes that the controversial point is why Xiaomi, who has sufficient cash flow and good cash flow, should do so. The report believes that, given the growing profits, the issue will trigger investors concerns about the inefficient cash operation of Xiaomi group. In addition, financing at such a high valuation may affect investors confidence in future valuation increases.
In fact, millet is not short of money. According to the three quarterly reports released at the end of November, as of September 30, 2020, the cash and cash equivalents of Xiaomi group were RMB 30.3 billion.
According to the net amount raised by Xiaomi group this time is 889.6 million US dollars, and the net amount raised by allotment is 3.1 billion US dollars, which is equivalent to about 26 billion yuan according to the current exchange rate.
That is to say, after financing, Xiaomis cash and cash equivalents will increase to about 56 billion yuan.
There is also the view that the market does not want to see the high price discount of large financing.
There is no shortage of cash and investors dont like it. What is Lei Jun doing for?
One possibility is that Xiaomi will seize the opportunity to further compete for market share of smart phones.
Globally, Xiaomis smartphone shipments in the third quarter beat apple, ranking third. Although Bank of America Merrill Lynch downgraded Xiaomi, it is still optimistic about Xiaomis advantages in smart phones.
According to the report, Xiaomi has told some suppliers that its internal target is even higher - the shipment volume is expected to be about 300 million units next year. However, the article also mentioned that it seems unlikely to achieve this goal. For example, chip suppliers may not be able to provide so many chips for a company, especially when the supply chain is impacted by the new crown epidemic.
The official account of WeChats public money suggests that Xiaomi is a huge fundraising company with sufficient funds and is willing to join the hottest track, the smart electric vehicle.
Here we have to mention Xiaomis competitor Huawei. Huawei has officially clarified the previous rumor about its car making plan.
(for more wonderful financial information, click here to download the wall street news APP) source: Wall Street news editor: Chen Hequn_ NB12679
(for more wonderful financial information, click here to download the wall street news APP)