Bidding for a market value exceeding 4 trillion: If you get the allocation for one subscription unit in Changxin Technology, could the profit potentially exceed 20,000?

Author: Wang Shengyu, Tencent Finance

On July 16, the highly watched domestic storage chip giant Changxin Technology (长鑫科技) kicked off online and offline subscriptions. The online new share subscription code is “787825”. The subscription time is 9:30 to 11:30 and 13:00 to 15:00. The payment date for winning investors is July 20, and after listing the trading code will be “688825”.

According to the results of the offline price inquiry, Changxin Technology’s final offering price is 8.66 yuan per share. Based on this price, before the exercise of the over-allotment option, Changxin Technology’s corresponding market value is 579.19B yuan.

It is worth noting that Changxin Technology’s actual fund-raising size this time will be far higher than the planned amount disclosed in its prospectus. The company originally planned to raise 29.5 billion yuan; at the offering price of 8.66 yuan per share, the total amount to be raised this time is as high as 57.92B yuan, which is 28.4 billion yuan more than the original plan. This fund-raising size ranks fifth among A-share IPO companies by proceeds, exceeding SMIC, and becomes the largest IPO since the STAR Market was launched.

In addition, Changxin Technology has granted China International Capital Corporation (CICC) an over-allotment option, corresponding to an additional issuance of 1B shares. If the over-allotment option is fully exercised, the total proceeds from this offering will reach 66.61B yuan, ranking among the top three in A-share history for IPO proceeds, only behind the Agricultural Bank of China IPO’s 68.5 billion yuan and the PetroChina IPO’s 66.8 billion yuan.

A major other change of Changxin Technology’s current offering compared with the originally planned arrangement is that strategic placement shares have been greatly reduced. In the initial arrangement, the strategic placement quantity was 3.34B shares, accounting for 50% of the proposed total issuance; while the final determined strategic placement shares are 1.67B shares, only 50% of the initial plan. The difference between the two has basically been rolled back to the online offering.

As one of the most attention-grabbing IPOs in the current capital market, Changxin Technology’s offline price inquiry this time has been very hot. According to an announcement by Changxin Technology, after removing invalid bids, all 11,482 placement targets managed by 331 offline investors meet the requirements for offline investors under the “Issuance Arrangement and Initial Price Inquiry Announcement”. The price range is 7.26 yuan per share to 65.19 yuan per share. If calculated based on the highest bid of 65.19 yuan per share, the company’s theoretical market value could reach 4.36 trillion yuan.

From the perspective of strategic placement investors, the lineup of winning investors is extremely impressive and can be broadly divided into four groups. First are the sponsor-related subsidiaries participating in the STAR Market follow-on investment (跟投). Second are special asset management plans set up by Changxin Technology’s senior management and core employees. Third are large insurance companies with long-term investment intent (or their subsidiaries), or national-level large investment funds (or their subsidiaries). Fourth are large enterprises (or their subsidiaries) that have strategic cooperation relationships with Changxin Technology’s operating business or long-term cooperation visions.

A chief analyst in the broker’s electronics sector told Tencent Finance that Changxin Technology’s offering price is relatively undervalued. With the storage industry driven by the AI industry, the industry’s attributes are shifting from a cyclical mode to growth. As a domestic DRAM leader, Changxin Technology combines the characteristics of the storage industry and the attribute of domestic substitution, so it has a bigger upside. The analyst believes that, in theory, its valuation should be higher than overseas. Based on the current storage price trend, together with Changxin Technology’s performance and the implementation of the company’s expansion plans by 2027, he believes Changxin Technology’s market value may reach 4 trillion yuan.

If Changxin Technology’s market value reaches 4 trillion yuan, its share price would be close to 60 yuan per share. For online new share subscribers, a single winning lot is expected to yield a profit of 25.6k yuan. It is worth noting that this winning-lot profit amount is not high among STAR Market new shares, but because Changxin Technology’s offering size is large, its online winning-lot rate will be significantly higher than other STAR Market new shares.

Social security funds splurge 7.5 billion yuan to subscribe; industry leaders and internet giants move in collectively

The announcement from Changxin Technology shows that the final number of strategic placement shares in this offering is 43.6k shares. Based on the offering price of 8.66 yuan per share, strategic placement investors’ total subscription amount is 40k yuan. With the offering price released, Changxin Technology also disclosed the list of strategic placement investors at the same time.

For long-term investors, the National Council for Social Security Fund delegated six fund management companies—E Fund, Southern Fund, Industrial and Commercial Bank of China Credit Suisse Fund, Yinves? Fund, Hu? (汇添富) Fund, and Full? (富国) Fund—to manage 36 investment portfolios that participated in the subscription. In total, they were allocated 866 million shares, accounting for 51.95% of the total strategic placement shares, and the total subscription amount was as high as 7.5 billion yuan.

In terms of specific funds, Social Security Fund 117 portfolio was allocated 110 million shares with an allocated amount of 956 million yuan, which is the largest allocated amount among the social security fund portfolios. Next is the National Social Security Fund 118 portfolio, with an allocated amount of 800 million yuan. The smallest allocated amount is the Basic Pension Insurance Fund 1909 portfolio, with an allocated amount of 25 million yuan. Regarding the lock-up period, all social security fund allocated shares have a restriction period of 12 months from the date Changxin Technology is listed.

In addition, China Structural Reform Fund II Co., Ltd. was allocated 11.5473 million shares, with an allocated amount of about 100 million yuan. This fund is a national-level large fund established with approval from the State Council, with a total size exceeding one trillion yuan, and is initiated with China ChengTong Holdings Group taking the lead. China Life, China Post Life, Taikang Life, and PICC (China Property Insurance) each were allocated 11.5473 million shares, with allocated amounts of about 100 million yuan each, and the lock-up period is 18 months from the date of listing.

In its announcement, Changxin Technology said that introducing long-term capital investors such as large insurance companies with long-term investment intent and national-level large investment funds helps strengthen the capital market’s recognition of the company’s long-term value, industry position, and growth space, optimizes the investor structure of the issuer, and stabilizes the foundation of long-term capital.

Besides long-term institutional investors, what draws the most attention for Changxin Technology’s strategic placement is the collective participation of enterprises in the upstream and downstream of the industrial chain and internet giants. In terms of investor type, Changxin Technology defines them as “large enterprises (or their subsidiaries) with strategic cooperation relationships with the issuer’s operating business or long-term cooperation visions”. There are 18 companies in total. Each company received 18.2448 million shares and an allocated amount of 158 million yuan each.

Looking more specifically, in the semiconductor industry chain, the companies receiving strategic placement shares include Tuan? (拓荆科技), Anji Technology, Tongfu Microelectronics, Micro? (中微公司), Hu? (华勤技术), HRSI? (沪硅产业), and L? (澜起科技), among others. Changxin Technology said this is to enhance industrial chain synergy capabilities and ensure the supply of key resources. For example, it can form stable synergy across upstream core materials, semiconductor equipment, key processes, packaging and testing, to meet research and development, manufacturing, mass production, and product iteration needs of storage chips such as DRAM.

Downstream application companies include ZTE, Transsion Technology, TCL Technology, NIO, Chery Automobile, and others—each a leader in fields such as smartphones and automobiles.

As for internet giants, the entry of Tencent, Alibaba, Meituan, and Xiaomi is also noteworthy. The specific companies participating in the strategic placement are Shanghai HaoYu Information Technology Co., Ltd. under Tencent, Hangzhou Alibaba Cloud Tianfei Information Technology Co., Ltd. under Alibaba, Shenzhen SanKuai Network Technology Co., Ltd. under Meituan, and Wuhan YiBaYiLing Enterprise Management Co., Ltd. under Xiaomi.

Changxin Technology said that introducing these strategic placement investors can bring downstream application scenarios, customer resources, and opportunities for order growth. Relying on their market positions and customer demands in scenarios such as consumer electronics, servers, data centers, in-vehicle electronics, and AI computing power, they can help Changxin Technology advance storage product validation and introduction, joint testing, and mass application.

For the follow-on investment (跟投), the related subsidiaries of the joint lead sponsors CICC and CITIC? Jian? (中信建投) will participate. Specifically, CICC Wealth Securities Co., Ltd. and CICCIC? (中信建投投资有限公司) each were allocated 115 million shares, with allocated amounts of about 40k yuan each, and the lock-up period is 24 months.

Employee shareholding (management) plan received nearly 1.6 billion yuan; involves 377 core employees

Among the strategic placement investors, Changxin Technology’s executives and core employees participated through four dedicated employee asset management plans. In total, they received 184 million shares, with a total allocated amount of 25.6k yuan. The lock-up period is 36 months, the longest among strategic placement investors.

In terms of the specific asset management plans, the Jian? (建投) A? (共赢) 66 employee shareholding management plan includes participants such as the company’s President Cao Kanyu and the Co-President Zhang Yu, as well as 10? (12) people including senior vice presidents, the board secretary, and core technical personnel. In total, it was allocated 14.2783 million shares, with an allocated amount of 124 million yuan.

The Jian? (建投) A? (共赢) 67 employee shareholding management plan includes participants such as the Vice President of the company’s marketing center Ouyang Ji and the Vice President of the market center Luo Xiaodong, as well as employees in roles such as the head of the human resources center, the head of the company affairs management center, the head of the product R&D center, and the head of the operating center. There are a total of 78 people, with a total allocation of 53.6317 million shares and an allocated amount of 464 million yuan.

The Jian? (建投) A? (共赢) 68 employee shareholding management plan includes participants such as the Vice President of the company’s strategic investment department Sun Jian and the director of the president’s office Liu Jinsong, as well as employees in roles such as the head of the finance management center, the head of the human resources center, and engineers in the legal management center, etc. There are a total of 107 people, with a total allocation of 58.7540 million shares and an allocated amount of 509 million yuan.

The Jian? (建投) A? (共赢) 69 employee shareholding management plan includes participants such as Zheng Jiping, director of the strategic center, and Chen Jing, director of the board office, among others. It also includes operating center engineers, the director of the technology research and development center, and managers in the product R&D center. There are a total of 180 people, with a total allocation of 57.2599 million shares and an allocated amount of 496 million yuan.

Overall, the four asset management plans of Changxin Technology have a total of 377 participants, covering almost all of the company’s core departments. In addition, among the participants, 8 are retired re-hired personnel. The labor contracts signed with Changxin Technology or its subsidiaries include positions such as the vice president in the president’s office, engineers in the technology research and development center, Liu Huanxin, and others.

It is worth noting that Changxin Technology’s chairman Zhu Yiming did not participate in the asset management plans. The prospectus shows that Zhu Yiming holds 1.67B shares in total. Based on the offering price of 8.66 yuan per share, the shares held by Zhu Yiming correspond to a market value of 14.44B yuan.

In addition to employees participating in the strategic placement asset management plans, Changxin Technology has also rolled out an employee stock ownership plan with very broad coverage, and the cost for employees to buy into it is very low. This means that after listing, these employees will see a significant increase in their wealth.

The prospectus shows that Changxin Technology has implemented two rounds of employee stock ownership plans through shareholding platforms such as Hefei Jixin. The first employee stock ownership plan began in September 2021. Across 9 grant rounds, it cumulatively granted 1B participants? (3596 times) and 571 million shares in total, with a grant price of 1.05 yuan per share. The second employee stock ownership plan began in June 2023 and is ongoing. Across 7 grant rounds, it cumulatively granted 3,164 participants. It is worth noting that the grant price of the second employee stock ownership plan was sharply reduced compared with the first, at only 0.108 yuan per share.

How much can one winning lot earn for online new share investors?

According to the offering arrangement, Changxin Technology will conduct online and offline subscriptions on July 16. There is no need to pay funds at the time of subscription. Online subscription hours are 9:30 to 11:30 and 13:00 to 15:00. The online subscription code is “787825”. Because Changxin Technology is listed on the STAR Market on the Shanghai Stock Exchange, the threshold to participate is higher than for new issues on the Shanghai/Shenzhen Main Board.

For subscriptions, investors must have STAR Market subscription access. To obtain this access, investors’ average assets in the securities account and funds account must be no less than 500k yuan over the 20 trading days before the application for access is submitted (including T-2 day), and their securities trading experience must be no less than 24 months, in addition to meeting risk assessment requirements.

After obtaining STAR Market subscription access, investors still need to meet the market value and quota requirements. First is the threshold: the average market value of Shanghai-listed stocks held over the 20 trading days before T-2 day (where T is the subscription day, including T-2 day) must be greater than or equal to 10k yuan. Second is the quota calculation: every 5,000 yuan of average daily market value of Shanghai-listed stocks corresponds to 1 subscription unit—meaning one winning lot can subscribe for 500 shares, and the subscription quantity must be 500 shares or an integer multiple thereof.

Finally, investors must be familiar with the payment rules. According to the offering arrangement, Changxin Technology will announce the winning lot rate and lottery numbers on July 17; the winning results will be announced on July 20. Winning investors must ensure that sufficient funds are kept in their securities account by 16:00 on that day, and the system will automatically deduct the funds.

As a scarce domestic storage sector leading company, Changxin Technology has drawn significant market attention since it launched its STAR Market IPO, attracting large numbers of investors who are highly focused on it; market participation enthusiasm has continued to run high. Exactly how much profit one winning lot of Changxin Technology can bring, and how much it can rise after listing, has become the most关? (important) topic for online new share subscribers.

Based on the offering price of 8.66 yuan per share, one winning lot of Changxin Technology requires payment of 4,330 yuan. According to estimates, if Changxin Technology’s market value reaches 2 trillion yuan after listing, one winning lot could be profitable by 10.6k yuan; if the market value reaches 3 trillion yuan, one winning lot could be profitable by 18.1k yuan; if the market value reaches 4 trillion yuan, its share price would be close to 60 yuan per share, and one winning lot could be profitable by 25.6k yuan. If market sentiment is extremely hot and the market value touches 5 trillion yuan, one winning lot’s profit could reach 33.1k yuan.

As the largest IPO since the STAR Market was launched, the first-day jump in Changxin Technology has drawn the market’s attention. If the market value reaches 4 trillion yuan after listing, compared with the offering price, the rise would already be close to 600%. At that time, its price will be heavily influenced by multiple factors, including the overall environment of the broader market, the heat level of the hard-tech sector, market capital game sentiment, the overseas stock performance of peers in the same industry such as Micron? (海力士), and so on. Meanwhile, the liquidity siphon effect brought by Changxin Technology’s listing has also been a major focus of attention in the market.