ChangXin Memory Technologies, Inc. (CXMT) listed on Shanghai’s STAR Market this morning. Open: RMB 49.50 against an offer price of 8.66. Up 471.6%. Market value: RMB 3.3 trillion, straight past ICBC to the top of the A-share table.
The biggest winner is the city of Hefei. Its state funds hold more than a third of the company, now worth over RMB 1.1 trillion.
Everyone calls Hefei the smartest venture capitalist in China. Wrong trade. Hefei is a scavenger. It buys what nobody else wants, at the moment nobody else will touch it.
Look at what it actually picked up.
BOE, 2008. A panel maker bleeding cash, born from a dying vacuum tube factory in Beijing. Global banks would not lend to it. Hefei postponed a subway line and put a third of its fiscal revenue into a RMB 17.5 billion fab. Today Hefei is one of the largest display clusters on earth.
Qimonda, 2009. Germany’s last DRAM champion, dead in the financial crisis. Its patents went into the bin. CXMT’s technology base started with what Qimonda left behind. Phase one cost RMB 18 billion. The city put up four fifths. Officials were told to their faces that Hefei could not do DRAM. Founder Zhu Yiming took no salary for seven years.
NIO, late 2019. Stock at USD 1.19. William Li was named the most miserable man in China. Weeks from running out of cash. Months later, Hefei led a RMB 7 billion rescue and took equity. You know how that trade ended.
Today CXMT is the world’s No.4 DRAM maker, the first new full-stack IDM to break into the global top four in two decades. Q1 revenue: RMB 50.8 billion, up 719% year on year. Global DRAM share: 8% and climbing.
The pattern is not luck, and it is not genius. It is price discipline at the point of maximum disgust. Every distressed asset came with the labels attached: overcapacity, sunset industry, lost cause. Hefei read the labels as a discount.
I rode the Hefei metro last year. The air conditioning runs at half power. Half the lights stay off. It feels poor.
It is not poor. It postponed that metro system in 2008 to pay for BOE. Seventeen years later it still rations the electricity and writes RMB 150 billion cheques. That is not a budget problem. That is the culture of a city that treats every yuan like it belongs to the next bet.
Wall Street pays a premium for clean stories. Hefei pays scrap value for dirty ones, then waits ten years.
One city’s landfill is another city’s balance sheet. And the lights stay dim on the way to the bank.
*Transcribed from Jaime Xiao’s LinkedIn feed.*