CHINESE smartphone maker Xiaomi Corp., whose valuation could soon register at $70 billion, gave its founder and chief executive a token of its appreciation: $1.5 billion in stock, no strings attached, in one of the largest corporate paydays in history.

Xiaomi, which is in the process of going public in Hong Kong, this week said in a securities filing that it recently awarded the stock to a separate company controlled by founder and CEO Lei Jun.

The $1.5 billion amount awarded to Mr. Lei’s entity, Smart Mobile Holdings Ltd., reflects what Xiaomi recorded as share-based compensation expenses on April 2.

Beijing-based Xiaomi this week launched an initial public offering at a share-price range of 17 to 22 Hong Kong dollars (US$2.17 to US$2.80), hoping to raise up to $6.1 billion from the sale.

At the bottom end of the offered price range, Mr. Lei’s stock award would be worth about $1.38 billion and at the upper end a little over $1.79 billion.

The stock compensation award isn’t tied to any future performance metrics or goals, according to a person familiar with the matter, adding that Mr. Lei never received bonuses in the past.

At a press conference on Saturday morning in Hong Kong to discuss Xiaomi’s IPO, the company’s co-founder and president Lin Bin defended the board’s decision to grant Mr. Lei the large stock award. He said other startups and companies have compensated their CEOs with stock ahead of their IPOs, and Xiaomi isn’t the first and won’t be the last to do so.

Mr. Lin said Xiaomi’s board unanimously agreed to offer Mr. Lei shares to thank him for his contribution to the company, and Mr. Lei “knew nothing about it.”

Large stock awards that aren’t contingent on companies meeting goals are rare, said John Roe, head of ISS Analytics, the data intelligence arm of Institutional Shareholder Services.

Some highflying technology startups in recent years have awarded their founders stock worth hundreds of millions of dollars often tied to future IPOs.

Tesla Inc.’s shareholders in March approved a pay package for CEO Elon Musk worth $2.6 billion that could ultimately gain him billions more over 10 years.

That compensation package, however, is predicated on the electric-car company’s value surging to $650 billion over 10 years, as well as a string of performance goals being met. The company’s market capitalization stood at $59.01 billion late Friday in New York.

Chinese e-commerce company JD.com Inc. gave its CEO a large stock award in the months before it listed in New York in 2014, saying it was “in consideration of his past and future services,” according to its prospectus.

The restricted stock, which was valued at around $900 million at the company’s IPO price, was converted into tradable securities when the retailer went public.

The CEO had turned down stock-based compensation before the IPO, the company said at the time.

Mr. Lei, a Chinese entrepreneur, founded Xiaomi in 2010 and built it into the world’s fourth-largest smartphone company, behind Samsung Electronics , Apple Inc. and Huawei Technologies Co., according to industry researcher IDC.

The 48-year-old businessman is Xiaomi’s largest shareholder, and entities linked to him will own about 29.4% of the company after it is public, according to a document viewed by The Wall Street Journal.

He also will control more than half of the company’s voting rights, and his total stake would be worth roughly $20 billion if Xiaomi prices its offering at the high end of the stated range.

Mr. Lei isn’t selling any of his Xiaomi shares in the IPO and has committed not to do so for six months after the listing in early July.

He can sell some shares in the ensuing six months but not relinquish control of the company.

Xiaomi said in the document seen by the Journal that since its inception, Mr. Lei has led its business strategy and corporate culture, overseen key products and services and worked to reduce costs and improve efficiency in the business.

As a result, it said, smartphone sales increased sharply last year, contributing to a 68% jump in Xiaomi’s revenue to 114.6 billion yuan ($17.6 billion) in 2017.

The company reported a net loss of 43.89 billion yuan last year, but excluding one-time charges, it said its profit was 5.36 billion yuan.

The company said Mr. Lei also helped attract early investors and has been deeply involved in the company’s investment and growth strategy. Xiaomi’s last private funding round in 2014 valued the company at around $45 billion.

The price of Xiaomi’s IPO will be determined next week, with the company set to list in Hong Kong on July 9.

The company is aiming for a market valuation between $54 billion and $70 billion, according to term sheets viewed by the Journal, after scaling back the fundraising ambitions it had earlier this year.

In the run-up to its listing, the company has been pitching itself as a fast-growing phone and internet services company with a significant presence in China and some overseas markets like India.

It is known for making lower-priced smartphones and internet-connected electronic gadgets like smart rice cookers. Mr. Lei has called Xiaomi an “innovation-driven internet company” that wants to increase sales from software and online services in the years ahead. - WSJ

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