The biggest Chinese ever: Meet the new chip company
The Chinese memory chip company CXMT is reaching the largest IPO in Asia this year, but in a parallel market, it is already trading at a value almost five times higher than the IPO price. What is behind the huge gap, and why does this story also affect Israeli pension savings?
ChangXin Memory Technologies, known by its abbreviation CXMT, is the largest memory chip manufacturer in China and the fourth largest in the world in the DRAM market, those temporary memory chips found in every server, computer, and smartphone.
This coming Monday, it is expected to begin trading on the Shanghai Stock Exchange in an IPO that will raise up to 8.6 billion dollars. This is the largest IPO in Asia this year and the largest in the history of the STAR market, Shanghai's technology exchange.
The IPO price was set at 8.66 yuan per share, about 1.28 dollars, reflecting a valuation for the company of about 579 billion yuan. So far, the official story. The interesting story is happening somewhere else entirely.
The company Trade.xyz offers on the decentralized trading platform Hyperliquid a futures contract that tracks CXMT and allows betting on its value even before the IPO. The contract is trading around 6.35 dollars, after recently touching 8.60 dollars.
This price reflects a market value of about 425 billion dollars, about 2.9 trillion yuan, a value that would make CXMT the most expensive company traded in China, higher than the country's largest bank, ICBC, which trades at about 2.56 trillion yuan.
Where does the gap come from? Foreign investors are almost completely blocked from the IPO, and even a private Chinese investor is required to have an account balance of half a million yuan and two years of trading experience to enter the STAR exchange.
Eric Chen, CEO of the finance company Injective Labs, explains that this market is not really pricing the company but guessing where trading will open, and that part of the premium is simply the price the world is willing to pay for exposure that cannot be obtained in a normal way.
The memory market is at a historic high against the backdrop of artificial intelligence demand and a global supply shortage, which are pushing prices up and flowing record profits to manufacturers like Samsung, SK Hynix, and Micron. China, for its part, is trying to reduce dependence on chip imports.
The Israeli saver has a double exposure here. On one hand, advanced study funds and pension funds hold a heavy weight in global technology stocks that are benefiting today from high memory prices. On the other hand, the expansion of Chinese production capacity may in the long term flood the market and erode those profits.
At the same time, Israeli testing and metrology equipment manufacturers Nova and Camtek also sell to memory manufacturers, so a wave of Chinese investment is a potential opportunity, but also a risk if China prefers local suppliers or if export restrictions are tightened.
So how much can one rely on those contracts regarding the value of CXMT? A contract on Cerebras stock converged to a gap of about 1.3% from the opening price, while a contract on SpaceX trades at a premium of about 20% above the IPO price.
The platform itself is also controversial and was included in June on the investor alert list of the regulator in Singapore. On the first day of trading, the gap will close all at once, one way or the other.
