Xiaomi Group (小米) announced on October 21, 2019, that the company has repurchased 2,781,400 Class B shares in Hong Kong Stock, representing 0.012% of the company’s initial issued shares.
The shares were repurchased at a price of HKD 8.98 to HKD 8.99 per share, with a total cost of HKD 24.99 million. The stock opened at HKD 8.89 and closes at HKD 8.850, a decline of 3.65%.
This is not the first time the Beijing-based handset manufacturer has taken such a move on the Hong Kong Stock Exchange.
From January 17 to 23 of this year, Xiaomi (1810: HKSE) bought almost 20 million Class B shares. In March, the company also repurchased 2,792,000 shares and spent nearly HKD 25 million. The highest price was HKD 8.96 and the lowest price was HKD 8.92.
Xiaomi’s IPO was launched on the Hong Kong Stock Exchange on July 9, 2018. The share price opened at HKD 16.6 (equivalent to USD 2.12) per share, below the IPO price of HKD 17 (equivalent to USD 2.17). On the day of the offering, the company had a market cap of USD 52.7 billion.
Since the unlocking of more than USD 3 billion shares in January of this year, the stock price has dropped more than half of its initial offering price. On October 22, the stock closed at HKD 8.850.
The stock buyback is part of Xiaomi’s reversal cash-management strategy, which aims at boosting its declining stock price while further raising the company’s valuation. However, the buybacks risk reducing the company’s earnings-per-share and further threaten investor confidence.
The efficacy of Xiaomi’s buyback strategy is still yet to be seen. Recently the Hong Kong stock market has suffered some losses due to continuous massive anti-government protests over already withdrawn extradition bill that began in the city in June, with billions of dollars been pulled out of the market.
The Hong Kong long-months protests also affected the e-commerce giant, Alibaba Group (BABA: NYSE), which has postponed plans to list its shares on the Hong Kong Stock Exchange. The offering was expected to raise between USD 10 billion to 15 billion.