Luxshare Precision Industry builds components for Apple. They make the tiny white earbuds that fall out of your ears and into subway grates. They assemble the charging cables that fray after six months. Critical work. Now they want $3.1 billion from Hong Kong investors to continue this noble mission.
The company plans to raise 24.27 billion Hong Kong dollars. That's the same amount in two currencies because financial journalists think you're too stupid to understand one number. They're right. You are.
Here's what retail traders will do with this information: absolutely nothing useful. They'll see "Apple supplier" and start fantasizing about supply chain exposure. They'll convince themselves that buying Luxshare stock is basically buying Apple stock but smarter. It isn't smarter. You're not smarter.
Luxshare makes hardware. Hardware margins are thinner than the justification for your last options trade. Apple takes the fat cut. Luxshare gets whatever's left after Tim Cook finishes counting. But sure, this is your ticket to generational wealth.
The Hong Kong share sale will price at some number. That number will be based on calculations performed by investment banks who are paid to make other numbers look appealing. Then the stock will trade. It will go up or down based on factors that have nothing to do with whether Luxshare successfully manufactures Lightning cables. You will check the price every four minutes anyway.
Somewhere in Shenzhen, a Luxshare executive is preparing a roadshow presentation. He will explain to institutional investors why $3.1 billion is a reasonable amount to pay for a company whose largest customer could drop them tomorrow for a supplier that charges three cents less per unit. The institutional investors will nod thoughtfully. They will buy the shares. They will sell the shares to you at a markup six months later, right before the next earnings miss.
Apple doesn't need Luxshare. Luxshare needs Apple. You need to stop confusing those two things.
Photo by on Unsplash
Leave a Comment