Huawei Stock: Can You Invest in It?
Founded in 1987 by an ex-officer of the People’s Liberation Army called Ren Zhengfei, Huawei is one of the biggest smartphone manufacturers in the world (and no, it’s not pronounced like Hawaii, it’s Wah-Way).
The company has quickly risen to the ranks to become one of the most popular smartphone brands, second only to Apple and Samsung. Of course, Huawei has its fingers in a lot of tech pies including the manufacture of communication equipment, electronics, and infrastructure. This is part of what makes it an industry behemoth with an annual revenue that hit $120 billion in the year 2019 alone.
However, its massive success hasn’t changed the company’s legal status. Huawei is still a privately held company whose shares cannot be traded on the stock market because they’re wholly owned by company employees. However, just because this company cannot be traded on doesn’t mean that investors shouldn’t pay attention to it.
After all, it continues to grow as one of the world’s largest smartphone manufacturers.
How Huawei Makes Its Money?
Huawei manufactures consumer goods and is in the enterprise and carrier aspects of the market as well. Because it’s not a public company, Huawei stock is not traded publicly and isn’t required to file anything with the Securities Exchange Commission (SEC). Nevertheless, Huawei still offers reports on its books.
The company’s 2018 annual financial report showed a $107 billion revenue which was a 19.5% increase from the previous year. Profits had increased by a whopping 25%, and the company sold over 200 million units in that year alone, which was a significant jump from 3 million units in 2010.
The company’s largest market is China and in 2018 the company reported a 19% increase in sales within the country, while the overall Asia Pacific region saw a 15% increase in sales. Adversely, sales in the American region dropped by 7% for the second successive year.
Why Isn’t It Allowed to Invest in Huawei?
Currently, only China-based Huawei employees can own stock in the company and it’s not available for purchase by anyone else outside of the country. It’s interesting to note that the company’s very own shareholders show a complete lack of understanding when it comes to the company’s holdings, financials, and overall structure. They also don’t have any voting power, despite owning stock in the company.
The structure works this way; nine candidates are elected from 33 union members to attend as representatives in the annual shareholder meeting. The shareholders may earn performance-based bonuses in addition to their dividend payments. Shareholders also get annual salary reviews.
When asked if the company would list on the stock market any time soon, Huawei’s upper management all-out rejected the idea. But, if the company continues to grow at its current trajectory, then it may be forced to trade publicly in order to raise the capital needed to continue growing exponentially.
But, even if Huawei eventually lists on the stock market, it probably wouldn’t do so in the U.S. due to the unfavorable relationships between the company and the US government.
While you may not have any prospects of owning Huawei stock, there are other investments that you can pursue which offer a similar effect. In fact, there are plenty of investments that are designed to enable participation in Chinese market growth, especially in the smartphone industry.
This includes a lot of publicly-traded Huawei competitors, which have also shown exponential growth. If you’re not sure which stock to pick out of these options, then an exchange-traded fund (EFT) or mutual fund might be the best option.
Look out for ones that include a basket of the main device manufacturers. Tech-focused funds are also great and include the prestigious Vanguard Information Technology ETF or the iShares U.S. Technology ETF.
Should you desire a Chinese-based investment, consider one of the many broad-spectrum funds that offer investment opportunities in emerging markets like China.
In 2019, Huawei made history by surpassing Apple as the largest smartphone manufacturer in the world, second only to Samsung. Despite its massive success, Huawei is not publicly traded and doesn’t offer an opportunity to invest in its rapid growth.
The complicated relationship between Huawei and the U.S. only makes this harder for investors who want to invest in the company, and only employees of the company based in Shenzen, China can become shareholders.