Chinese smartphone maker Xiaomi has repurchased more than 6 million shares as investors sell after a lockup period.
The company bought the Class B shares at an average price of HKD 9.76 ($1.24), totaling nearly HKD 60 million. The company closed at HKD 10.16, up just over 4% compared to Thursday.
“The board believes that the current financial resources of the group enable it to implement the share repurchase while maintaining a solid financial position,” Xiaomi said in a statement to TechNode, adding its brand proposition with cost-efficient products “will be even more compelling in current market conditions.”
In an annual meeting earlier this month, Xiaomi CEO Lei Jun announced a RMB 10 billion (around $1.5 billion) investment plan in artificial intelligence (AI) and smart devices over the next five years. The company said it has confidence in its business outlook, which is driven by its smartphones and AIoT strategy—a term used to describe the convergence of AI and internet of things technologies.
“Xiaomi shares have been negatively affected since the global consumer electronics market cooled in 2018, and the company intends to provide a boost to the market,” Jin Di, longtime industry watcher and former analyst with research firm the International Data Corporation, told TechNode.
She added that listed companies generally buy back shares at this time of the year, a move that aims to stabilize their market value while showing off cash flow.
Xiaomi’s share price slumped around 20% in the days preceding the expiry of the company’s six-month lockup period. The company has seen its market value nearly halve since it went public in Hong Kong last July, as China’s “capital winter” starts to bite and the smartphone market slows.
Earlier this week, the company’s share price dropped by 3% following the sale of 231 million Class B shares by an undisclosed investor.
“Xiaomi’s business performance, especially in internet services, wasn’t exciting enough, failing to improve investor confidence and fulfill the promises the company made during its IPO,” said Jin.
Xiaomi shipped nearly 1 billion devices in 2018. Apart from its hardware business, it is also an internet services company, offering online music and movies to around 220 million users. However, these services only accounted for 9.3% of its total revenue in the third quarter of 2018.
Yan Zhanmeng, research director at Counterpoint Technology, a Hong Kong-based market research firm, said he expects a fair increase in the company’s share price in the coming days, though it “would still be mostly decided by the company’s profitability.”