After a bad first day in its Initial Public Offering (IPO), the second day of Xiaomi in the stock market had very positive numbers, and is that after the drop in the price of its shares, the Chinese brand has seen an incredible increase of 13% which means a surplus of 9 billion dollars compared to the market value.
The second day of Xiaomi in the stock market began with a price of 17 dollars per share in the market value, ending the day with a price of 19 dollars, being a quite considerable increase, this “rebound effect”, as it is known in the market, has meant a profit of 9 billion dollars for the Asian company.
This rebound supposes a total of 1.2 billion dollars in shares for Xiaomi in the stock market, compensating the bad opening on its first day with shares in one billion dollars, being one of the worst IPOs since 2015. Time will tell if the shares hold their price or if their behavior positively or negatively affects the Asian titan.
Xiaomi still has challenges to face to convince investors
Xiaomi has to overcome its current sales standards throughout its catalog of devices and convince investors that the company has not reached its maximum and that it still has much to achieve in the organizational and financial aspect, the goal is to convince investors that Xiaomi is a company that still has a long way to go.
The company must become less dependent on the sales of its mid-range smartphones, and establish itself in the international market as a first-line company, which is what the company has been doing recently, since it has diversified into several product sectors in different markets, from clothing products for the user as its great quantity of home devices.
If they can develop some kind of ecosystem in the IoT space, as well as in the smartphone space, then they could well develop some type of switching cost and a real way to increase the returns and margins (of profit)”. – Daniel Baker, analyst at Morningstar Investment
The statements of Daniel Baker, an analyst at Morningstar Investment, an external stock, portfolio, and data analysis company.
Xiaomi in the stock market, a path that until now, has been turbulent
Xiaomi’s expectations in the stock market are ambitious, the search to prove that the company is worth twice as much as Apple is a path that will not be easy to overcome when talking about one of the leaders of the technological market for several decades.
The company led by Lei Jun positioned an initial offer more expensive than that of leaders in the technology sector such as Apple itself or even Facebook. The justification for such a high cost of Xiaomi shares in the stock market is its impact on the Internet services market, one of its strengths being its business related to Big Data, even though the vast majority of its sales come from hardware.
Now the challenge before the real difficulties will be to convince the investors that the company is valued at the price they have set, which time will tell by the behavior of the market before this new technological titan in competition.
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