The board of Chinese smartphone maker Xiaomi passed Tuesday a resolution on share buybacks, paving the way for the company to repurchase up to $4.3 billion in shares.

Why it matters: Tuesday’s announcement is part of the company’s broader efforts to boost investor confidence.

  • The company’s share prices have lost nearly a third of their value since debuting on the Hong Kong stock exchange in July 2018, hurt by a slowing smartphone market and low margins in its hardware business—the company’s biggest source of revenue.
  • Xiaomi share prices surged 8.7% during Wednesday’s morning trading session.

Details: Xiaomi’s board of directors has approved a resolution allowing the company to repurchase up to 10% of its issued shares, according to a statement filed with the Hong Kong stock exchange on Tuesday.

  • Xiaomi has issued 24.1 billion shares, according to the filing, meaning the company could buy back up to 2.4 billion shares. The value of that 10% of shares as of Wednesday was HK$33.1 billion (around $4.3 billion).
  • The resolution allows the company to repurchase shares, but it has not yet announced a plan. A Xiaomi representative declined to comment.

Context: The Beijing-based company is looking to roll out a more aggressive share buyback initiative following an earlier plan announced in September to repurchase up to HK$12 billion (around $1.6 billion) worth of stock in an effort to halt its decline in value.

  • The company has executed nearly 20 buybacks since the September announcement. In April, it spent nearly HK$500 million on two buybacks on two consecutive days.
  • Shares have climbed 65% since the announcement. However, they remain at two-thirds the value of the initial public offering price.
  • The company said in March its revenue for the fourth quarter rose 27.1% year on year to RMB 56.5 billion (around $8 billion), with RMB 66 billion in cash reserves as of end-2019.

Wei Sheng

Writing about semiconductors and telecommunications.