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Report: Xiaomi to raise $3B Chinese depositary receipts in $10B IPO in Hong Kong

Chinese smartphone giant Xiaomi Corp. is planning to raise $3 billion in Chinese depositary receipts, or CDRs, in its upcoming Hong Kong initial public offering, Reuters reported June 4, citing people close to the matter.

The Beijing-based company will reportedly sell shares in mainland China and offer the remainder to Hong Kong investors. The CDR portion is likely to account for 30% of its $10 billion blockbuster IPO, according to the report. By doing so, Xiaomi is set to become the first overseas-listed Chinese internet company to seek a secondary listing in China through CDRs, the report added.

Originally, the smartphone company had intended to raise as much as $10 billion from an IPO of shares in Hong Kong only.

The CDR issuance will allow Chinese investors to hold Xiaomi's shares despite its listing outside of China and is a new initiative from the Chinese government that aims to lure big technology companies listed overseas to float their shares on its domestic stock market.

The Beijing-based company has already chosen CITIC Securities Co. Ltd. to manage issuance of the Chinese depositary receipts and it has hired Morgan Stanley and Goldman Sachs Group Inc., as the IPO's joint sponsors.

The revision comes ahead of Xiaomi's June 7 listing hearing in Hong Kong for its IPO, Bloomberg News had reported.

On May 3, Xiaomi filed an application for what is pegged to be the biggest listing in 2018. The company is discussing a possible valuation of between $60 billion and $70 billion.

Xiaomi's decision followed the Hong Kong Exchange and Clearing Ltd.'s listing rule change, which has been seen as a catalyst to bring such companies to the city. The rules, which came into effect April 30, cover specific criteria for qualified biotech companies that have to yet to generate revenue or profit and innovative companies with weighted voting rights structures to list in Hong Kong.

However, analysts have said that the IPO in Hong Kong paired with the recent listing reforms may not be enough to give the city a competitive edge in the global tech space, citing Hong Kong's "prescriptive" regime.