9 December 2020
AXT’s first-tranche private equity investment in Tongmei raises $22.5m
AXT Inc of Fremont, CA, USA – which makes gallium arsenide (GaAs), indium phosphide (InP) and germanium (Ge) substrates and raw materials – says that the first tranche of the private equity investment in its China-based wafer manufacturing company Beijing Tongmei Xtal Technology Co Ltd has been fully funded, totaling about $22.5m. Three funds within the Haitong Private Equity Group make up the first-tranche investors: Liaoning Haitong New Energy Low-Carbon Industry Equity Investment Fund Co Ltd, Liaoning Haitong New Kinetic Energy Equity Investment Fund Partnership (Limited Partnership) and Haitong Innovation Securities Investment Co Ltd.
On 16 November, AXT announced a strategic plan to access China’s capital markets and progress to an initial public offering by Tongmei on the Shanghai Stock Exchange’s Sci-Tech innovAtion boaRd (the STAR Market). To qualify for a STAR Market listing, Tongmei is required to have multiple independent shareholders. The first major step in this process is engaging reputable private equity firms in China to invest funds in Tongmei. In exchange for a minority stake of about 7.14% in Tongmei, private equity firms will invest about $50m. The second tranche of about $26.5m is expected to fund in January. The second tranche investment documents have not yet been executed.
“The applications and customer opportunities for which we have been preparing over the last two years are now taking shape. The materials we produce are proving to be an essential part of many of the technologies that will define advancements in telecommunications, networking, healthcare, consumer products, and other verticals for many years to come,” says CEO Morris Young. “Our success to date in positioning ourselves for an IPO of Tongmei on the STAR Market reflects the strong market demand for our products and our future growth, as well as our well-established presence in China,” he believes. “We appreciate The Haitong Group’s enthusiasm for our business and its cooperation throughout this process. We look forward to continuing to build a long and positive relationship.”
The process of going public on the STAR Market includes several periods of review and is therefore a lengthy process. Tongmei does not expect to accomplish this goal until mid-2022. AXT has now posted a brief summary of the plan and the process on its website. The listing of Tongmei on China’s STAR Market will not change the status of AXT Inc as a US public company, which will continue to be listed on the Nasdaq Global Select Market under the symbol AXTI.