Chinese memory semiconductor company Shenzhen Longsys Electronics...is the largest on the Hong Kong stock market, at approximately $800 millionThe company has launched an initial public offering (IPO) to raise funds. The company, which is already listed on the Shenzhen Stock Exchange, is issuing additional H-shares in Hong Kong in an effort to secure funding for research and development while gaining access to overseas capital markets.
Longsys has a total of 26,077,800 sharesis offering H shares in a public offering at a maximum price of 240.60 Hong Kong dollars...was proposed. If all shares are issued at the highest price, the total offering size will be approximately 6.27 billion Hong Kong dollars, which amounts to $799.8 million according to Reuters' exchange rate.
However, The $800 million is not the confirmed amount raised, but the maximum total amount based on the highest offering price. The final offering price and the actual net proceeds may vary depending on the subscription results and various costs.
| Public offering of up to 6.27 billion Hong Kong dollars
According to the prospectus filed with the Hong Kong Stock Exchange, Longsys's ticker symbol is 09976Wow. If you multiply the number of shares offered by the maximum offering price, the maximum total proceeds come out to about 6.27431 billion Hong Kong dollars.
The figure of 6.27 billion Hong Kong dollars cited in the article is a rounded number. Since the amount remaining after deducting acquisition costs and listing-related expenses is the net proceeds actually received by the company, the maximum total amount and the net proceeds should not be treated as the same figure.
| A 1:9 ratio between the Hong Kong offering and the international offering
The initial public offering allocation is divided between Hong Kong retail investors and international investors. Based on the initial allocation, the Hong Kong offering accounts for approximately 10 percent, while the international offering accounts for approximately 90 percent.
|
Category |
Number of H Shares |
Initial weighting |
|
Hong Kong Public Offering |
2,607,800 shares |
About 10% |
|
International Call for Entries |
23,470,000 shares |
About 90% |
|
Total |
26,077,800 shares |
100% |
This percentage may vary depending on whether reallocations are made, the size of the public offering is adjusted, or the over-allotment option is exercised. Therefore, the figures in the table represent the initial structure outlined in the prospectus, not the final allocation results.
| The target date for the final price is September 4, and the target date for the transaction is September 8
The company plans to set the final offering price by September 4 and announce the allocation results by September 7. If everything goes according to schedule, the H-shares will September 8 We're set to begin trading on the Hong Kong Stock Exchange.
There's a "planned" condition attached here, too. If the company and the lead underwriter fail to agree on a price by a certain date, or if the terms of the public offering change, the listing schedule and the actual amount raised may also change.
| 78.3% of net cash flow was invested in memory technology
Longsys plans to allocate approximately 78.3% of its net proceeds to strengthening its in-house R&D and innovation capabilities. The company has identified chip design and the development of advanced memory products as key investment areas.
The fact that most of the funds raised through the offering have been allocated to R&D means the company is prioritizing the enhancement of its proprietary technology and product competitiveness over simply expanding production capacity. However, while 78.3% of the funds are earmarked for use, the actual pace of execution and development results will need to be verified separately after the company goes public.
| A dual-listing structure connecting Shenzhen and Hong Kong
Longsys's Class A shares have been listed on the Shenzhen Stock Exchange since 2022 301308 It's being traded under a ticker symbol. Once this H-share listing is complete, a structure will be established that allows the company to raise capital and meet with investors in both the mainland Chinese and Hong Kong markets.
A listing in Hong Kong could help expand access to international investors and raise the profile of the company's overseas operations. On the other hand, we must manage both the disclosure standards of the two markets and investor expectations, while also taking into account the dilution of equity resulting from the issuance of new shares.
| Lenovo and Ingenic Join as Key Investors
Lenovo Groupand a Chinese semiconductor design company Ingenic Semiconductorhas been included on the list of cornerstone investors for this public offering. Cornerstone investors commit to purchasing a certain amount of shares prior to the IPO, thereby helping to support initial demand for the offering.
The fact that companies that use memory products and semiconductor companies participated can be seen as a sign of industry interest. However, the participation of cornerstone investors alone does not guarantee a certain stock price or business performance after the IPO.
| Strong profit growth, driven in part by base effects
Longsys announced that its net income for the first half of this year increased by more than 71,000% compared to the same period last year. While the numbers alone seem very large, such a high growth rate can appear even more significant when profits during the comparison period were very small.
The memory industry tends to experience significant fluctuations in performance based on changes in prices, inventory, and demand. When reviewing a prospectus, it’s important to look not just at growth rates, but also at whether absolute profit levels, cash flow, profitability by product, and R&D expenses are improving in tandem.
| What's More Important Than Going Public Is How the Raised Funds Are Actually Used
This IPO is an example of a Chinese memory company securing substantial funds for technology development and expanding its access to international capital markets. Given its large scale—based on the upper end of the offering price range—and the fact that most of the net proceeds will be allocated to R&D, it could also influence the company’s future product strategy.
The key points to watch going forward are the final offering price, the actual net proceeds, and whether trading will begin on September 8. Following the IPO, it will be important to monitor how the 78.3% of funds earmarked for research and development are allocated to chip design and advanced memory products, and how this translates into revenue and profitability.
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