Billions of Xiaomi Shares Are About to Be Unlocked for Sale

(Bloomberg) -- Many Xiaomi Corp. investors, who could only watch as the stock shed $14 billion in market value, will now be able to join in on the selling.

Expiring Wednesday is the six-month lockup period that followed the company’s Hong Kong debut, during which some employees and cornerstone investors were banned from disposing of their allocated shares. It’s been painful: Xiaomi has dropped to HK$11.10 from a listing price of HK$17, sinking 7.5 percent Tuesday as JPMorgan Chase & Co. gave up its buy recommendation on the stock.

More than 3 billion shares will be unlocked, equal to about 19 percent of those outstanding, according to data compiled by Bloomberg.

Touted by bankers last year as China’s answer to Apple Inc., Beijing-based Xiaomi sought a valuation that would have made it the most expensive smartphone maker in the world. The stock trades at 17 times projected 12-month earnings, less than half its July multiple. It’s still 44 percent more expensive than Apple, which is reeling from its worst quarterly rout in more than a decade.

To be sure, longer-term investors may want to hold on to Xiaomi’s shares rather than dump them at a loss. Analysts on average still predict Xiaomi will rebound to its IPO price. Hedge funds have been increasing their bearish bets, with almost 30 million shares sold short Tuesday, the most since August.

Xiaomi attracted the likes of China Mobile Ltd. and U.S. wireless-chip giant Qualcomm Inc. as cornerstone investors last year. The lockup period for some insiders can stretch as long as 12 months.

©2019 Bloomberg L.P.