Xiaomi has added a suitably communist spin to its planned multibillion-dollar initial public offering: a promise to curb profit margins on its handsets and other gadgets.
Investors, who are being asked to value the Chinese handset maker as high as $100bn, will be signing up to a company that will “forever limit the net profit margin after tax for its entire hardware sales to a maximum of 5 per cent”, Xiaomi said on Wednesday.
Analysts were flummoxed by the timing. “Xiaomi is seen as the Apple of China in order to justify that valuation,” said Richard Windsor, founder of independent research company Radio Free Mobile. “This would blow that comparison out of the water. For one seeking a $100bn valuation, this was not a wise move.”
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