China’s second-biggest mobile phone maker Xiaomi raised nearly US$4 billion overnight in a combined sale of shares and convertible bonds in the biggest top-up funding placement in Hong Kong to replenish its financial war chest, according to documents filed with the city’s stock exchange.

The smartphone maker raised US$3.1 billion selling shares for HK$23.70 (US$3.06) each, the low end of an expected price range, according to people familiar with the matter, declining to be named for discussing matters that are not public. That price represented a 9.4 per cent discount to Xiaomi’s closing price of HK$26.15 on Tuesday.

Xiaomi raised another US$855 million selling a seven-year, zero coupon convertible bond, with a conversion premium of 55 per cent above the reference share price, the people said.

The equity placement was oversubscribed, with interest by regional investors, existing shareholders and multi-strategy funds, one of the people said.

The equity allocation was concentrated, with the top 10 investors receiving more than 60 per cent of the book, the person said. On the convertible bond allocation, the top 10 investors accounted for about 65 per cent of the deal, the person said.

Xiaomi shares fell 7 per cent to a 10-day low of HK$24.30 after a half-day trading suspension for its top-up financing announcement, the biggest one-day percentage drop in almost three weeks.

The company’s shares have been among some of the best performing in Hong Kong this year, more than doubling in value since the beginning of the year.

Bloomberg News reported the overnight fundraising earlier Wednesday.

Xiaomi’s top-up fundraising is the largest on record in Hong Kong, surpassing the US$2 billion sale in April 2006 by China’s largest offshore oil explorer CNOOC, and beating the US$1.74 billion sale of additional shares in May 2015 by China Taiping Insurance Holdings, according to Refinitiv’s data.

This year had been a high-water mark for top-up placements in Hong Kong, with the year-to-date reaching a five-year high of US$7.28 billion, more than six times the amount raised in the same period last year, Refinitiv said.

The Beijing-based smartphone maker, which also produces an eclectic portfolio of household items and appliances from roller pens to bags and smart speakers, plans to use the proceeds of the share-and-bond sale to expand its working capital. The company also plans to invest to increase its market share in key markets, and in “strategic ecosystems,” Xiaomi said in the stock exchange filing.

S&P Global Ratings said the transaction by Xiaomi was “opportunistic”, given the strength of equity markets and the company’s ample cash on hand. The company’s pro forma adjusted cash exceeded its gross debt by more than 20 billion yuan (US$3.05 billion) as of September 30, according to S&P analysts Hins Li and Clifford Kurz.

“This cash cushion will help the company weather any immediate business and industry volatility created by the pandemic,” the S&P analysts said in a client note on Wednesday.

Xiaomi was forced to pare back its initial public offering when it first went public in Hong Kong in 2018, raising US$6.1 billion at the time. The company had hoped to raise as much as US$10 billion by selling shares in Hong Kong and becoming the first company to issue Chinese depositary receipts in the, but postponed its plans.

The latest fundraising follows Xiaomi reporting a 34 per cent jump in third-quarter revenue as it continues to expand its business overseas. Xiaomi grabbed market share from Huawei Technologies in Europe and aggressively challenged its rival domestically as Huawei faced supply troubles because of United States sanctions, which have been described as a “death sentence” for the company.

Credit Suisse, Goldman Sachs, JPMorgan Chase and Morgan Stanley are underwriters on the offering.