Cambricon's shares closed 230% higher in STAR Market IPO debut
By Chen Yurong and Wang Tianyu
Chinese AI chipmaker Cambricon Technologies Corp. on Monday closed at 230 percent higher than its offering price in its IPO debut on Shanghai's Nasdaq-style STAR Market, with market capitalization standing at near 8.50 million yuan.
The chip startup priced the listing at 64.39 yuan (9.22 U.S. dollars) per share, offering 40.1 million new shares, which aimed to raise 2.58 billion yuan. The price opened at 260 yuan, then surged to a peak of 295 yuan, or 348 percent higher, in a short time, but cooled down later. For most of the trading day, the stock price bounces between 210 to 230 yuan.
The debut came four days after another chip giant, Semiconductor Manufacturing International Corp. (SMIC), made China's biggest IPO on the same market, as it saw its opening price 246 percent higher than the offered price of 27.46 yuan.
Why such market exuberance?
Cambrian took less than five years from its establishment to its IPO, which was shorter than that of AI companies that applied for IPO in the same period.
Attributing factors behind the market exuberance to Cambricon, Jiang Hao, assistant portfolio manager at Shanghai-based hedge fund Jiuyan Asset, told CGTN that China has put strategic emphasis over the semiconductor industry in recent years, "which makes related sectors hot cakes in the secondary market."
"Cambricon is the first listed AI chip maker in the A-share market, with strong support from capitals," he added.
Since its establishment, Cambrian has completed multiple rounds of financing. Its investors include Alibaba, iFlytek, Lenovo Ventures, Chinese Academy of Sciences Venture Capital, China Guoxin, and other heavyweight enterprises and investors.
Will strong performance last?
Despite the impressive performance of the debut, Cambricon is still a relatively small company that is losing money. The company's net loss ballooned to 1.18 billion yuan in 2019, from 41 million yuan a year earlier, although its revenue more than tripled to 443.9 million yuan, according to the company's prospectus.
Jiang said as the company hasn't been able to generate profit, it will continue to invest a lot of capital in research and development in the future. He added that Cambrian's current products and business model are not yet completely stable.
"From an overall point of view, the current capital market has certain expectations for the Cambrian, but many investors also question whether the company's future business model can be sustainable," he cautioned.
Cambrian can be regarded as a witness to China's domestic AI chip industry from its inception, craze, and the cooling-off period. 2018 is regarded as the milestone year of domestic AI chips.
Chipmakers are lining up to list in China, seeking to exploit a bullish market and strong investor appetite for a sector crucial to Beijing's rivalry with Washington for technology supremacy, making these companies become recent investor favorites.
China has been stepping up capital market reforms amid tech-related tensions with the United States.
The official China Securities Journal said on Monday China's economy was recovering, while its capital markets are undergoing reform and attracting money from home and abroad, setting the scene for a healthy bull market.