LEADING Chinese mobile phone maker Xiaomi officially filed for a Hong Kong initial public offering ( IPO ) on Thursday May 3, in what is expected to be the largest-ever listing by a Chinese tech company in Hong Kong. Despite a net loss in 2017, Xiaomi’s IPO is still anticipated to attract a large number of investors in Hong Kong.

The drafted prospectus shows that Xiaomi recorded a revenue of 114.6 billion yuan ( US$18 billion ) in 2017, up from 68.4 billion yuan in 2016. The operating income was 12.22 billion yuan in 2017, tripling the amount of 3.79 billion yuan in 2016.

Yet, the high growth rate of operating income did not give Xiaomi a net profit in 2017. The net loss was 43.89 billion yuan, mainly due to the fair value adjustment of callable convertible preferred shares. The adjustment was more an accounting issue than a business issue.

Xiaomi’s revenue sources come from smart phones, IoT ( Internet of Things ) and consumer products, internet services, and others. In 2017, smart phones contributed 70% of its total revenue while IoT and consumer products accounted for 20.5%.

According to Xiaomi founder, executive director, chairman and CEO Jun Lei, Xiaomi was the fourth largest smart phone maker globally in Q4 2017, only behind Apple, Samsung and Huawei. In addition, Xiaomi has 190 million monthly active users and it has built the largest IoT platform globally, connecting with over 100 million smart devices.

In a recent product launch ceremony, Lei gave a guarantee from its management to all of its users that the general profit margin of its hard device business will never exceed 5% in 2018.

“When Xiaomi was established, we had a big dream, which is to change the order of the business world with low efficiency,” says Lei in letter to the public. “Great companies make their products cheaper and cheaper. They spare no efforts in making good products and make every cent that users spent worth its value.”

In terms of the shareholding structure, Lei holds 31.4% of total shares. Through the dual-class share structure, the voting right of Lei exceeds 50%, which makes him the controlling shareholder of Xiaomi.

A few days prior to the IPO application, Xiaomi announced a change in its management team. Its co-founders Guangping Zhou and Jiangping Huang both resigned from the company due to personal reasons while CFO Chew Shou Zi was appointed as senior vice president. The movement was regarded as paving the way for the IPO. According to source close to Xiaomi, Zhou and Huang actually did not have significant roles in Xiaomi prior to the resignation and the resignation is to optimize the management.

On April 30, the dual-class share structure was officially allowed in Hong Kong and Hong Kong Exchange started to accept IPOs from companies with such structure. Xiaomi then became the first batch of beneficiaries of this regulatory reform in Hong Kong.

“Kind people won’t have bad luck. Always believe good things will soon happen, as we’ve been doing,” says Lei.

Citic CLSA, Goldman Sachs, Morgan Stanley were appointed as the joint sponsors in Xiaomi’s IPO.