Lei Jun, chairman and chief executive officer of Xiaomi Corp., right, and Chew Shou Zi, senior vice president and chief financial officer, give a thumbs up while posing for photographs ahead of the company’s listing ceremony at the Hong Kong Stock Exchange in Hong Kong, China. (Photographer: Anthony Kwan/Bloomberg)

How to Make a 56,823% Return With Hong Kong's Worst Ever IPO

(Bloomberg) -- Xiaomi Corp. is a perfect example of how taking a company public can make a select number of shareholders a lot of money, even if the IPO flops.

The stock lost about 30 percent in the six months that followed its Hong Kong debut, making it the city’s worst-performing initial public offering with a value of at least $3 billion, according to data compiled by Bloomberg. Selling pressure intensified this week after a mandatory holding period for some investors expired Wednesday.

For those who snapped up stock in Xiaomi’s earliest funding round, offloading the shares this week still proved to be hugely profitable. They paid as little as 1.95 Hong Kong cents for a slice between September 2010 and May 2011, according to the Beijing-based company’s prospectus. Almost 4 billion shares were sold at that price. Early holders could have pocketed a 56,823 percent profit if they sold at Tuesday’s close of HK$11.10.

How to Make a 56,823% Return With Hong Kong's Worst Ever IPO

You can’t blame investors for rushing to lock in those gains before things get worse for Xiaomi. Analysts have been trimming their profit and sales forecasts, blaming China’s slowing smartphone market and intensifying competition. Xiaomi was one of the most hyped IPOs of 2018, with bankers initially touting a valuation of as much as $100 billion. The company’s market capitalization has dropped to about $30 billion.

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