What’s new: China’s securities regulator denied market rumors Tuesday that it launched probes of companies in smartphone giant Xiaomi Corp.’s industrial chain or restricted such businesses’ plans for selling shares.
In response to social media reports, the China Securities Regulatory Commission (CSRC) said it has not restricted the initial public offerings (IPOs) of companies related to Xiaomi and has not conducted any specific investigations.
The CSRC said it would continue to vet companies’ IPO plans according to relevant rules and regulations and would treat all applicants fairly and keep policy expectations stable.
Several investment bankers said they had not heard of any regulatory actions, but one person said that some companies’ dependence on Xiaomi’s industrial chain has become an obstacle in their road to IPOs.
Some analysts attributed the speculation to Xiaomi’s recent reduction of its stake in Beijing Roborock Technology Co. Ltd., a Chinese maker of robotic sweeping and mopping devices. Some are concerned that Xiaomi aims to push such related companies to go public and then cash out, even though it’s normal for investors to reduce holdings on expiration of IPO lockup periods.
The background: Investment plays an important role in Xiaomi’s business landscape. As of the end of 2021, Xiaomi invested in more than 390 companies with a total book value of 60.3 billion yuan, up 25.7% year-on-year, according to its annual report. The Chinese smartphone maker recorded a net after-tax gain of 3.3 billion yuan from investments in 2021. Xiaomi said its investments can bring not only financial benefits but also business synergies.
Xiaomi owns 24.7% of Roborock through its associated companies Tianjin Jinmi Investment Partnership and Shunwei Capital, according to Roborock’s prospectus. Roborock went public in February 2020 on Shanghai’s Nasdaq-style high-tech board. The robotic vacuum maker said last month that some shareholders including Xiaomi plan to offload 10.75% of the company.
In the second quarter of last year, Tianjin Jinmi sold more than 1.3 million Roborock shares and cashed out 1.65 billion yuan ($2.59 million).
As of April 2020, 32 Xiaomi-invested companies were seeking to sell stock in China, according to a report by Xiaomi and the Grandall Law Firm. The most frequently asked legal questions in the IPO vetting of these companies were their related-party transactions and relations with their controlling shareholders.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bob.simison@caixin.com)
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