Chinese smartphone maker Xiaomi Corp announced an HK$12 billion ($1.53 billion) share buyback plan on Tuesday, in a reversal of its cash-management strategy that is aimed at boosting its floundering stock.
China’s Xiaomi Boosts Shares With USD 1.5 Billion Buyback Plan
Xiaomi shares responded to news of the buyback, its biggest, by climbing nearly 7%.
Last week the company scrapped an already delayed plan to offer equity in China, a move aimed at attracting mainland investors hungry to buy into global companies. The company said then it had enough money and would focus on business development.
Shares of Xiaomi, which listed in Hong Kong last year, have lost nearly a third of their value this year and are at half their initial public offering price, hurt by the company’s sharply slowing growth and increased competition.
According to research firm Canalys, Xiaomi’s market share in China declined by a fifth in the April-June quarter even as that of smartphone giant Huawei Technologies surged by 31 percent.
The stock has also been hit by losses at the Hong Kong stock market, which has plunged since massive anti-government protests started in the city in June. Companies on the city’s exchange have collectively bled $152 billion in value since June.
Baker said the plan to offer shares in the mainland was likely aimed at getting a higher valuation in the Chinese market than it was about raising funds. The buyback announcement shows the company has enough cash, he said.
Xiaomi had cash and cash equivalents of 34.9 billion yuan ($4.92 billion) as of June 30 and total borrowings of 13.8 billion yuan. The company generated positive cash flow of roughly 11 billion yuan in the June quarter.
Xiaomi said in a stock exchange filing, “The board believes that a share repurchase in the present conditions will demonstrate the company’s confidence in its own business outlook and prospects. Xiaomi’s current financial resources will enable it to implement the repurchase while maintaining a solid financial position.
