Many Xiaomi Corp (小米) investors, who could only watch as the stock shed US$14 billion in market value, will now be able to join in on the selling.
Expiring today 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 has been painful: Xiaomi has dropped to HK$11.10 from a listing price of HK$17, sinking 7.5 percent yesterday as JPMorgan Chase & Co gave up its buy recommendation on the stock.
More than 3 billion shares would be unlocked, equal to about 19 percent of those outstanding,data compiled by Bloomberg showed.
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 is still 44 percent more expensive than Apple, which is reeling from its worst quarterly rout in more than a decade.
Longer-term investors might want to hold on to Xiaomi’s shares rather than dump them at a loss.
Analysts on average still predict that Xiaomi is to rebound to its initial public offering price. Hedge funds have been increasing their bearish bets, with almost 30 million shares sold short yesterday, the most since August.
Xiaomi attracted the likes of China Mobile Ltd (中國移動) and US chip giant Qualcomm Inc as cornerstone investors last year.
The lockup period for some insiders can be as long as 12 months.
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