Chinese memory chip giant ChangXin Memory Technologies (CXMT) is proceeding with a blockbuster initial public offering (IPO) on the Shanghai Stock Exchange's STAR Board, aiming to raise as much as $9.8 billion. The offering, priced at 8.66 yuan per share, consists of 6.69 billion shares, or up to 7.69 billion shares if the overallotment option is fully exercised. This makes it China's largest mainland IPO since 2010 and the biggest ever mainland tech share sale, surpassing Semiconductor Manufacturing International Corp.'s 2020 offering of 46.3 billion yuan.
CXMT, founded in 2016, is the world's fourth-largest DRAM chipmaker with an estimated 8% market share, trailing Samsung, SK Hynix, and Micron. The IPO is seen as a crucial step in Beijing's push for technological self-sufficiency in semiconductors, particularly in memory chips vital for artificial intelligence (AI) data centers. Proceeds from the IPO will fund research and a significant capacity expansion, with some estimates suggesting a doubling of output this year. Analysts like Larry Yang from First Seafront Fund Management and Zhang Guobin of eetrend.com highlight the IPO's significance for China's semiconductor industry and AI buildout.
The offering has attracted strong institutional backing, with half of the shares reserved for strategic investors including state entities like the National Social Security Fund and government-backed SOE restructuring fund, as well as major insurers. Retail investors will have access to a smaller 10% portion of the offering. Investors are showing high expectations, with some analysts predicting CXMT's valuation could soar to 3 trillion yuan ($443.33 billion) or even 5 trillion yuan after listing, a significant jump from its IPO valuation of 579.18 billion yuan. CXMT's first-quarter revenue surged 700% year-over-year to 50.8 billion yuan, with a net profit of 25 billion yuan, contrasting with a loss the previous year.
Despite being on the Pentagon's list of Chinese companies with alleged military ties, which does not prohibit U.S. firms from dealing with them, CXMT's IPO signals a rapidly growing customer base for chipmaking equipment and materials suppliers. The listing is also expected to generate substantial wealth for existing backers, including government-backed investors, Alibaba Cloud Computing Co., and GigaDevice Semiconductor Inc. However, some investors express anxiety, citing past mega deals that absorbed significant liquidity and were followed by market downturns, with Chinese stocks historically falling 0.8% in the week after such large debuts.
