Zhongji Innolight Co., a leading manufacturer of optical transceivers crucial for artificial intelligence and data centers, is reportedly preparing to gauge investor interest for a significant Hong Kong listing that could raise as much as $8 billion. This potential offering would mark one of the largest in Hong Kong since Alibaba Group Holding Ltd.'s $12.9 billion listing in 2019.
The Shenzhen-traded company has already received approvals from both China's securities regulator and the Hong Kong stock exchange. The strong interest and elevated deal size are attributed to the AI boom, which saw Innolight's shares rally 454% in Shenzhen over the past year, despite a recent 29% dip from its June peak. Innolight is a key supplier to tech giants like Nvidia Corp., Alphabet Inc., and Meta Platforms Inc.
Goldman Sachs Group Inc., China International Capital Corp., Morgan Stanley, and GF Securities Co. are acting as joint sponsors for the listing. The listing is part of a broader trend of Chinese companies in the AI supply chain raising capital in Hong Kong, contributing to a record year for first-time share sales in the city, which have reached approximately $35 billion this year. While the company is looking to move forward swiftly, final details such as size and timing are still subject to ongoing deliberations and market conditions.
However, some analysts are beginning to question the sustainability of the massive gains seen in AI-related stocks, suggesting that valuations might be stretched. Additionally, Innolight has faced a recent development where the U.S. Department of Defense added the company to its Chinese military companies list, though Innolight maintains this doesn't restrict its business with U.S. customers or securities trading, and they haven't seen material cancellations. The company's first-quarter revenue surged 192% to 19.5 billion yuan ($2.9 billion), with profit jumping 274% to 6.32 billion yuan.
