Six Chinese investment banks are poised to collect at least $41 million in fees from ChangXin Memory Technologies (CXMT)'s $8.6 billion initial public offering (IPO). This IPO marks Asia's largest so far this year and the biggest-ever Chinese A-share semiconductor IPO, surpassing Semiconductor Manufacturing International Corp (SMIC) in 2020. The banks involved include China Securities, CICC, China Merchants Securities, Guotai Haitong Securities, Guoyuan Securities, and Huatai Securities unit Huatai United Securities.
CXMT expects to pay 280.6 million yuan, equivalent to about 0.48% of the total proceeds, in underwriting and related fees. This rate is substantially lower than the 4.52% average for China A-share IPOs this year, according to LSEG data. Despite the reduced fee rate, the sheer size of the IPO allows the banks to earn significant proceeds. If an overallotment option is triggered, increasing the IPO proceeds to $9.8 billion, the fees could rise to 296 million yuan.
The payout from CXMT's IPO will contribute to the year's total fees from mainland IPOs, bringing them to approximately $684.62 million, up from $984.75 million last year. However, this is still well below the 2022 peak of $4.16 billion, which was driven by major listings from companies like China Mobile and CNOOC. The low fee rate for CXMT indicates its strong bargaining power in one of China's most high-profile listings, reflecting intense competition among banks to participate.
This IPO signals a resurgence in the onshore IPO market, spurred by government efforts to ease regulations for AI, semiconductor, and robotics companies seeking public funding to advance technological independence. Analysts, such as Shen Meng from Chanson & Co, view this IPO as having both significant commercial value and strategic importance for China's tech ambitions. While some experts believe the surge in CXMT's stock is temporary due to AI-driven memory shortages and state industrial policy, others like Kong Tuan Yuen of NUS suggest it could lead to Chinese chip companies moving up the semiconductor value chain, although geopolitics remain a drag.
