Xiaomi first announced it was going public on May 3 and hoped to raise $10 billion United States dollars to get to a total valuation of $100 million.
Founded in 2010, Xiaomi released its first smartphone in August 2011 and has rapidly expanded its market share to become one of China's leading smartphone manufacturers. "Even though Xiaomi remained to be a very good story, I think the market is at a stage where you have to prove yourself first before the market can give you a good valuation", Hao Hong, head of research at BOCOM International, told CNBC.
Xiaomi sold 2.18 billion shares in its IPO, 1.4 billion of which were new shares.
The Chinese smartphone maker opened for a trade down more than 2 percent on Monday.
The short-term share price is not as important as the long-term performance, as the general market situations are not ideal, according to Lei Jun, the founder and chairman of the Beijing-based tech firm.
Founded in 2010 by entrepreneur Lei Jun, Xiaomi has grown from a start-up in Zhongguancun - China's "Silicon Valley" - to become the world's fourth-biggest smartphone vendor at the end of past year, according to International Data Corp.
Xiaomi's IPO raised $4.7 billion at a valuation of about $54 billion, far lower than the big numbers that had been reported earlier in the year.
Typically companies are valued on a multiple of profits or sales.
"From day one, we've set up a dual-class share structure".
Xiaomi's lukewarm showing marks a blow for a smartphone maker with designs on expanding its global footprint and transforming from a low-margin hardware company into an Internet services player in the mold of Apple Inc.
Xiaomi's debut is seen as a key test of investor sentiment for what is expected to be a packed second-half of the year for Hong Kong IPOs, with offerings including online food delivery-to-ticketing services platform Meituan Dianping.
It is now the biggest smartphone vendor in India and is pushing into European markets including Spain and Russian Federation, though it has lost share in China recently to lower-cost rivals.