HONG KONG—Chinese smartphone maker Xiaomi Corp. priced a $4.7 billion initial public offering at the bottom of its target range, people familiar with the matter said, pulling off one of 2018’s largest IPOs despite investor skepticism about its growth prospects.
On Thursday, the eight-year-old company priced its offering at 17 Hong Kong dollars (US$2.17) per share, the people said, after last week setting a target range of HK$17 to HK$22. Xiaomi shares will begin trading in Hong Kong on July 9.
Beijing-based Xiaomi hoped to raise up to $6.1 billion from its IPO before trading started. The pricing gives the company a market valuation of around $54 billion. That is a sharp comedown from expectations earlier this year of a $100 billion valuation and is also less the $65 billion to $85 billion that several brokerage analysts had estimated Xiaomi to be worth.
The company encountered difficulties on the road to the IPO. Xiaomi’s offering kicked off at a tumultuous time for Chinese stocks, which have weakened due to concerns about China’s escalating trade conflict with the U.S.
In addition, when it came to Xiaomi’s business prospects, some analysts and potential investors never embraced the company’s narrative that it is an internet company. Instead, some said they viewed Xiaomi as a hardware company, which generally command lower multiples.
Investors in the IPO include China-focused investment firm Hillhouse Capital Group, which put in about $600 million, mutual-fund giant Capital Group Cos. with about $500 million and billionaire George Soros, a person familiar with the situation said. Goldman Sachs Group Inc., Morgan Stanley and CLSA led the stock sale.
U.S. chip giant Qualcomm Inc. and state-owned telecommunications company China Mobile Ltd. committed earlier to buy some shares in the IPO, among other cornerstone investors whose participation was aimed at strengthening demand for the offering.
Smartphones are Xiaomi’s largest source of revenue, though the company also sells internet-connected devices like rice cookers and fitness bands. It also makes money from internet offerings like video streaming and financial services. The company is aiming to generate more profits from its connected devices and software.
In May, Xiaomi said its 2017 revenue grew 68% to 114.6 billion yuan. It reported a net loss of about 43.9 billion yuan, though excluding one-time charges its profit was about 5.4 billion yuan.
Earlier, Xiaomi planned to be the first company to participate in China’s new depositary receipts program, which is designed to allow foreign-domiciled companies to list on the mainland. Xiaomi, which is domiciled in the Cayman Islands, earlier this month filed plans to float at least half its IPO in Shanghai.
But it canceled those plans just days later due to uncertainty about details of the rules for depositary receipts and disagreements with regulators about the size of the offering, people familiar with the discussions said. Regulators wanted Xiaomi’s shares to be priced lower to ensure a significant first-day trading gain, as well as a good post-listing performance to boost confidence in the new program, these people said, adding that Xiaomi executives had balked at the request.
Dozens of Chinese technology unicorns—private companies with valuations in excess of $1 billion—who are intent on going public in Hong Kong or New York are monitoring Xiaomi’s IPO closely, people familiar with the matter said. Some of those companies could reconsider the timing of their listings, depending on how Xiaomi shares trade in the coming weeks, the people added.
Another of China’s most valuable technology startups, online-services provider Meituan Dianping, applied this week to list in Hong Kong. The company, which private investors last year valued at about $30 billion, could raise around $6 billion in its IPO, people familiar with the potential share sale said. It is targeting a market valuation of more than $60 billion, the Journal has reported.
Write to Julie Steinberg at julie.steinberg@wsj.com and Stella Yifan Xie at stella.xie@wsj.com