30 billion in cash! Why does Xiaomi need huge amount of financing?

category:Finance
 30 billion in cash! Why does Xiaomi need huge amount of financing?


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.

On the afternoon of December 2, with the official announcement of Xiaomi group, the news was confirmed.

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.

Some industry insiders pointed out that Xiaomi groups shares were suspended in the early trading because the company failed to disclose the placement in time, which surprised traders.

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?

In addition to the rapid response to the stock price, not long ago, Bank of America Merrill Lynch also came to make up the knife..

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.

That is to say, after financing, millet s cash and cash equivalents will increase to about 56 billion yuan.

According to Yi Cai, Wen Tianna, non-executive chairman of Boda Financial Holding Co., Ltd., Xiaomi groups issuance of bonds and placement before the end of the year was regarded by some investors as seizing the opportunity when the stock price was at a high level and taking advantage of the situation to make large-scale financing, which also led to a setback in the short-term stock price, which made investors have certain accidents in the sensitive period at the end of the year. For investors who subscribe for convertible bonds, it is estimated that they do not want to bear short-term Stock price volatility.

There is no shortage of cash and investors dont like it. What is Lei Jun doing for?

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.

On December 2, according to Nikkei news reports, Xiaomi has been negotiating with suppliers to order components for up to 240 million mobile phones, which far exceeds Xiaomis shipment this year.

In addition to expanding its advantages in the smartphone business, there is also a speculation that Xiaomi is going to build a car.

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.

On November 25, Huawei management team issued a document to formally adjust the jurisdiction of smart car business to the consumer business management committee. Huawei does not build cars, but we focus on ICT technology to help car companies build good cars. Huawei once again reiterated that Huawei does not build complete vehicles, but focuses on ICT technology to help car companies build and build good cars, and become an incremental component provider of intelligent networked vehicles. In the future, those who propose to build cars and interfere with the company can be transferred from their posts and look for other posts.

(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)