Blacklisted Xiaomi Loses Over $38 Billion in Market Value in 2 Months

March 15, 2021 Updated: March 15, 2021

Shares of China’s second-largest cellphone maker, Xiaomi Group, have dropped almost 40 percent in value since the company was blacklisted by the U.S. government in January, and its market value has now evaporated by more than HK$300 billion ($38.64 billion).

Following the first open day on the Hong Kong Stock Exchange in 2021, Xiaomi’s share price reached HK$35.9 ($4.62) on Jan. 5, pushing its market value up to over HK$900 billion ($115.93 billion), according to Yahoo Finance.

The value has now slumped to around HK$600 billion ($77.29 billion), a drop of more than HK$300 billion ($38.64 billion) since the beginning of this year.

On March 11, Xiaomi Group announced (pdf) it would periodically repurchase its own shares on the open market for a maximum total of HK$10 billion ($1.29 billion).

Since the start of a new bull market in 2021, technology stocks have seen a sharp pullback, and Xiaomi is no exception. In addition, the cost of being blacklisted by the United States may have had a greater impact.

On Jan. 14, the Trump administration blacklisted Xiaomi and eight other firms as military-owned companies controlled by the Chinese Communist Party (CCP), requiring U.S. investors to divest their shares in blacklisted entities.

Global index publisher FTSE Russell announced on March 5 that it will remove Chinese companies such as Xiaomi from its global and Chinese indexes to comply with the U.S. executive order.

The S&P Dow Jones index will exclude Xiaomi before market opening on March 15.

The investment ban implemented by the U.S. Department of Defense would have come into effect from March 15, but U.S. District Judge Rudolph Contreras in Washington granted Xiaomi a preliminary injunction on March 12.

The founder of Xiaomi, Lei Jun, announced that the company welcomed the ruling and that the designation of Xiaomi as a Communist Chinese military company was “arbitrary and capricious.”

Lei, a retired military man, is also an investor in GalaxySpace.

The chairman of the technical committee of GalaxySpace, Deng Zongquan, is the chief scientist of the National Defense 973 Project, also known as Military 973, which develops future equipment technology for the CCP’s Ministry of General Armaments.

The Trump administration warned about the CCP’s strategy of military-civil fusion development (pdf), which grants the military access to cutting-edge technologies and expertise from not only Chinese companies, universities, and research programs, but also the world.