Chipmaker CXMT priced its IPO at 8.66 yuan per share and watched it surge 466% on debut. The Hefei-based company became the most valuable China-listed company. Someone explain to the bagholders who bought at the top why their shares are worth five times what institutional investors paid yesterday.
The company raised 57.92 billion yuan. That's $8.6 billion for anyone still checking their Robinhood account in dollars. Institutional money got in at 8.66 yuan. Retail got the honor of paying 49 yuan for the exact same piece of nothing. This is called price discovery. The market discovered retail traders will pay anything if you tell them it's going up.
CXMT makes memory chips. The stock doesn't care. The 466% surge doesn't reflect semiconductor demand or manufacturing capacity or any metric a sane person would analyze. It reflects the number of people who saw a line going up and thought that line owed them money.
Became the most valuable China-listed company on day one. Skipped the part where you build products and earn revenue and justify your valuation through fundamentals. Just went straight to most valuable. Like showing up to your first day of work and demanding the CEO's parking spot because you really believe in yourself.
The Hefei-based company now trades at a valuation that assumes every person in China will buy seventeen memory chips per day for the next forty years. The technical setup looks bullish though. RSI is overbought. MACD crossed over. The chart pattern clearly indicates everyone who bought today will be broke by Friday.
Retail traders saw 466% and started doing math on their phone calculators. Figured out what their $500 would be worth if they got in early. Forgot they didn't get in early. Bought anyway. The institutional investors who sold at 49 yuan thank them for their service.
Photo by on Unsplash
Leave a Comment