They’re excited in China, where the nation’s notoriously high-strung retail set bid for more than CNY7 trillion in shares of DRAM-maker CXMT, which went public Monday in the second-largest mainland IPO ever.
Although recent turmoil in Chinese tech shares in part reflected a sharp correction in chip stocks globally, some attributed the swoon to supply overhang and generalized “caution” in the run-up to CXMT’s debut.
A mid-month regulatory filing showed the retail portion of CXMT’s offering was more than 210 times oversubscribed, around tenfold “the comparable order book of SpaceX’s world-record IPO,” as Bloomberg helpfully pointed out.
I’m not sure “comparable” is the best word, though. As a reminder, China has a lottery-like, state-controlled process for retail IPO participation. I penned a short primer on that process in December. Long story short, the retail portion of new listings is allocated based on a kind of national sweepstakes.
The humorous version goes like this. You open a brokerage account, monitor the schedule for new listings, throw your name in a giant hat with no requirement to put any money down, cross your fingers, rub a rabbit’s foot, do a rain dance, sacrifice a goat and hope you get a piece of the deal. If you don’t it doesn’t matter because, as noted, the lottery tickets are free.
A more serious, technical explanation comes from SCMP. “China’s online IPO system does not require investors to provide cash when submitting applications,” the paper wrote, editorializing around news that nearly 9.5 million individual investor accounts applied for a CXMT allotment. “Instead, applicants receive lottery entries based on the value of their existing Shanghai-listed shareholdings; they pay only if they win allocations.”
It’s not at all unusual for the retail tranche to be massively (cartoonishly) oversubscribed, and because CXMT offered quite a few shares to individual investors, the allotment rate — 0.47% — was actually far, far higher than that for some of last year’s new listings.
Unlike some of those offerings, CXMT’s debut is of global concern. The company’s the fourth-largest DRAM maker behind Samsung, Micron and SK Hynix. As every mainstream financial media outlet was keen to point out Monday, it’s basically the only “pure-play” on Xi Jinping’s bid to make China a player in the global AI infrastructure buildout.
CXMT’s crucial for Beijing’s AI supply chain self-sufficiency ambitions, which is to say it’s a de facto strategic asset of the state. That, in turn, means the Party likely views it as too important to fail, ostensibly making it a much safer bet than more speculative plays on the AI race.
Bulls still insist we’re in a “super-cycle” for memory — that AI changed the game such that the space will be less prone to booms and busts going forward as financial results become more predictable. The jury’s out on that thesis, but it’s at least plausible.
So, CXMT has a fundamental bull case and state support. The IPO was also priced conservatively, making it look like a screaming bargain on some metrics versus its foreign peers, all three of which staged parabolic rallies this year as the scope of the world’s memory shortage became apparent to investors.
For the first five trading days, new listings on China’s STAR Board enjoy no limits on upside moves. Between that, pent-up demand from individual investors who didn’t win an allotment and generalized excitement over the chance to own shares of China’s homegrown memory champion, CXMT rose 466% on Monday. (The stock closed at CNY49, up from the sale price of CNY8.66. The intraday high was CNY55.)
As the figure shows, the first-day bonanza afforded CXMT a valuation more than half that of SK Hynix.
In addition, CXMT is now China’s most valuable listed company. Monday’s frenzied debut vaulted it ahead of ICBC, which is… well, I’ll just call it “amusing.”
The company has big plans, including a goal to double output and achieve something like full vertical supply-chain integration. CXMT will make its chips entirely in-house, insiders told Bloomberg, “from design to final assembly.”
A bit more in the way of context for Monday’s listing: CXMT’s debut surpassed SMIC’s 2020 offering for largest-ever mainland semi IPO. It also counts as the largest Asian IPO of 2026. Turnover was CNY141 billion, a record for any onshore-listed stock.
Naturally, skeptics worry this is another “bells at the top moment.” As one Shenzhen-based institutional investor warned two weeks back, “My biggest concern is that [CXMT] will go off the script the first day, driving up its size to extreme levels, signaling a top for Chinese tech stocks.”
