Shares of China's Xiaomi slid 5 percent on Wednesday, closing below its initial public offering (IPO) price for the first time since its first day of trade and hitting a record low.
The smartphone maker closed at 16.30 Hong Kong dollars ($2.08), below the 17.00 Hong Kong dollar price its stock had when it went public. The last time it did this was on its first day of trade when shares closed at 16.80 Hong Kong dollars.
But Xiaomi's Wednesday closing price represents a more than 24 percent decline from its record high close of 21.55 Hong Kong dollars on July 18.
It's not clear if there was a single catalyst for the sell-off in Xiaomi shares, but it appears to be part of a broader downturn in Chinese and Hong Kong-listed stocks. Hong Kong's Hang Seng Index closed over 1.5 percent lower, with major stocks such as Tencent ending the day in negative territory.
The trade war between China and the U.S. has been weighing on Chinese stocks, particularly those of technology companies. Xiaomi, which still makes the majority of its money in China, has been looking to expand to new markets, particularly in the West. It also has its sights set on the U.S. but has not made much progress in that market.
There's still a lingering concern that Xiaomi, which makes around 70 percent of its revenues from smartphones, might be relying too much on hardware, particularly in an increasingly competitive market. Still, it has shown strong growth, becoming the largest smartphone vendor in India in the second quarter, according to market intelligence provider IDC, and seeing a nearly 50 percent growth in smartphone shipments globally during the same period against the backdrop of a declining market.
But the company has made a business of selling high-quality phones at low prices with often thin margins. Similar to Apple, the company does have its own services business with video and music streaming offerings, but this only accounts for just over 8 percent of total revenues.
"I believe there is some fair skepticism on Xiaomi's business model as investors are scratching their heads on how Xiaomi will continue to make money beyond hardware. There is some ambiguity around if there is enough scale and capability to make money from services either by advertising or by content? Ads have taken the bulk of this and (Xiaomi is) effectively competing with big players," Neil Shah, research director at Counterpoint Research, told CNBC by email Wednesday.
"Xiaomi has its work cut out to form a solid strategy to drive meaningful services revenues and at the same time make sure its user base is increasing and not shrinking."