Chinese Memory Giant CXMT Seeks $9.8 Billion in Marquee IPO

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Trading on shadow markets showed exuberant expectations for CXMT the day after the pricing announcement. A perpetual futures contract on the Hyperliquid blockchain tied to its expected share price spiked in initial trading to reach as high as $8.64 Wednesday, about 575% above the offer price, implying a valuation of about $500 billion. Launched by Trade.xyz, the product creates a broader market for views on the deal. 

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Global investors have largely ignored China’s role in the AI supply trade, according to Brendan Ahern, chief investment officer of KraneShares.

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“Due to the small percentage onshore China makes up within global and emerging market indices, many have missed the exceedingly strong performance of Chinese semiconductor companies that are listed” on the STAR Board, Ahern said.

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Anhui-based CXMT will immediately become one of the biggest listed firms in China. Some analysts expect its market value at roughly 2 trillion yuan, based on a 20 times multiple for its projected net income of 100 billion yuan this year. That compares with 2.53 trillion yuan for the largest onshore-listed company, Industrial & Commercial Bank of China Ltd.

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The company plans to use the IPO proceeds to accelerate research and a sweeping capacity expansion that some estimates suggest could double output this year.

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Building a stronger domestic DRAM supplier is clearly a long-term priority for China, according to Steven Pelayo, managing director at the Blueshirt Group.

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“The key question isn’t whether CXMT becomes more competitive, it’s how quickly additional Chinese capacity comes online and will its technology and capacity impact both global supply and demand,” Pelayo said.

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Half of the offering has been reserved for strategic investors, which include state entities like investment vehicles under the National Social Security Fund and the government-backed SOE restructuring fund, as well as major insurers like PICC Property & Casualty Co. and China Post Life Insurance Co., a sign of the institutional backing behind one of China’s most closely watched listings. 

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The roster also includes key suppliers and strategic partners of CXMT, with affiliates of listed firms such as Shenzhen Transsion Holdings Co., Montage Technology Co., Xi’an ESWIN Material Technology Co., Nio Inc. and Alibaba Group Holding Ltd.

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Retail investors will get access to 10% of the offering, a smaller portion than recent Star Board IPOs. The lower offer price also means retail investors stand to capture less upside from any post-listing rally. Because each successful subscriber will be allotted a relatively small number of shares, the absolute gains from a first-day jump are likely to be limited. 

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However, the listing is poised to generate substantial wealth for CXMT’s existing backers, including government-backed investors in the city of Hefei and the national semiconductor fund. Alibaba Cloud Computing Co., and GigaDevice Semiconductor Inc. rank among the largest corporate stakeholders, each owning at least 1.6% of CXMT even after the overallotment option. 

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For some investors, though, the offering is triggering anxiety after earlier mega deals that absorbed vast amounts of liquidity proved to be turning points for equities. Chinese stocks tend to rise 2.4% on average in the month before listings that raise more than 20 billion yuan, a study by analysts at China Merchants Securities found. The market then tends to fall in the week after the debut, dropping 0.8% on average, the study showed.