AXT, Inc. (NasdaqGS: AXTI), a leading manufacturer of compound
semiconductor substrates, today announced a strategic plan to
access China’s capital markets in order to enhance its ability to
support at scale the strong, expected demand for strategic compound
semiconductor materials and to continue to elevate its business and
manufacturing operations in support of Tier-1 customer
requirements, as well as to replenish its cash with minimal
dilution and further strengthen its financial structure.
AXT plans to merge two of its raw material
companies into its wafer manufacturing company in China, Beijing
Tongmei Xtal Technology Co., Ltd. (“Tongmei”), subject to
completion of definitive documentation and applicable laws. The two
raw material companies, Beijing BoYu Semiconductor Vessel Craftwork
Technology Co., Ltd. (“BoYu”) and Nanjing JinMei Gallium Co., Ltd.
(“JinMei”), and their related entities in China are performing well
and add breadth of product diversity to Tongmei.
AXT will seek to list shares of Tongmei on the
Shanghai Stock Exchange’s Sci-Tech innovAtion boaRd (the “STAR
Market”), an exchange intended to support innovative companies in
China. The process of going public on the STAR Market includes
several periods of review and, therefore, is a lengthy process.
Tongmei does not expect to accomplish this goal until mid-2022.
The listing of Tongmei on China’s STAR market
will not change the status of AXT, Inc. as a U.S. public company.
It is a U.S. company, headquartered in Fremont, California. It will
continue to be listed on the Nasdaq Global Select Market under the
symbol AXTI.
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 approximately a
7.14 percent minority interest in Tongmei, private equity firms
will invest approximately $50 million. The first tranche investment
documents were executed on November 13, 2020 in China and the first
tranche of approximately $22.5 million is expected to be received
in late November or early December 2020. The second tranche of
approximately $26.5 million is expected to fund in January 2021.
The second tranche investment documents have not yet been executed.
AXT’s ability to retain these investments is contingent upon a
successful completion of the STAR Market listing. Tongmei would be
required to sell a minimum of 10 percent of its equity in the
public offering, bringing the total minority interest held publicly
to approximately 17.14 percent, or greater if Tongmei elects to
increase the offering above 10 percent.
“Pursuing a listing on the STAR Market gives us
the ability to replenish our cash and increase our market value for
our shareholders with minimal dilution,” said Morris Young, chief
executive officer. “Further, the additional capital will strengthen
our ability to compete for larger business opportunities. We have
largely completed the relocation of our manufacturing lines and now
our market-leading portfolio of materials is intersecting with what
we believe to be some of the biggest, most influential technology
trends of the next decade, such as 5G telecommunications, data
center connectivity, LED-based lighting and display, and
laser-based sensing. In addition to these opportunities, we believe
new applications across our portfolio are creating exciting
incremental opportunities on the horizon. Strengthening our balance
sheet can give our customers greater confidence in our ability to
support at scale the strong, expected demand for our strategic
compound semiconductor materials.”
BoYu manufactures pyrolytic boron nitride (pBN)
crucibles that are used when growing single-crystal compound
semiconductor ingots and used as effusion rings growing OLED tools.
JinMei produces 7N+ purified gallium and other specialty
materials.
“The combination of AXT’s wafer manufacturing
with BoYu’s and JinMei’s products and capabilities presents a
compelling and well-rounded business model,” Young continued. “They
synergistically serve a diverse set of customers and markets,
providing world-class materials to the semiconductor industry. We
believe that the convergence of a strong market opportunity with
state-of-the-art manufacturing capabilities and a diverse portfolio
of products will make Tongmei an attractive company for the STAR
Market and create incremental value for our shareholders.”
Conference Call
The company will host a conference call to
discuss these results today at 2:30 p.m. PT. The conference call
can be accessed at (844) 892-6598 (passcode 7117157). The call will
also be simulcast at www.axt.com. Replays will be available at
(855) 859-2056 (passcode 7117157) until, November 22, 2020.
Additional investor information can be accessed at
http://www.axt.com or by calling the company’s Investor Relations
Department at (510) 438-4700.
About AXT, Inc.
AXT is a material science company that develops
and manufactures high-performance compound and single element
semiconductor substrate wafers comprising indium phosphide (InP),
gallium arsenide (GaAs) and germanium (Ge). The company’s substrate
wafers are used when a typical silicon substrate wafer cannot meet
the performance requirements of a semiconductor or optoelectronic
device. End markets include 5G infrastructure, data center
connectivity (silicon photonics), passive optical networks, LED
lighting, lasers, sensors, power amplifiers for wireless devices
and satellite solar cells. AXT’s worldwide headquarters are in
Fremont, California where the company maintains its sales,
administration and customer service functions. AXT has
manufacturing facilities in China and, as part of its
supply chain strategy, has partial ownership in ten companies in
China producing raw materials. For more information, see AXT’s
website at http://www.axt.com.
Forward-Looking
Statements
The foregoing paragraphs contain forward-looking
statements within the meaning of the Federal securities laws,
including, for example, statements regarding AXT’s plan to merge
Tongmei, its wafer manufacturing company in China, with Boyu and
Jinmei, Tongmei receiving the first tranche of private equity
investment funds, signing investment documents to secure the second
tranche of private equity investment funds into Tongmei and
subsequently receiving such funds, completing other preliminary
steps in connection with the proposed listing of shares of Tongmei
on the STAR Market, being accepted to list shares of Tongmei on the
STAR Market and the timing and completion of such listing of shares
of Tongmei on the STAR Market. Additional examples of
forward-looking statements include statements regarding the market
demand for our products, our growth prospects and opportunities for
continued business expansion, including technology trends and new
applications, our market opportunity and ability to compete for
business opportunities, elevating our manufacturing, enhancing our
business processes and financial structure, our relocation and our
expectations with respect to our business prospects and financial
results. These forward-looking statements are based upon
assumptions that are subject to uncertainties and factors relating
to the company’s operations and business environment, which could
cause actual results to differ materially from those expressed or
implied in the forward-looking statements contained in the
foregoing discussion. These uncertainties and factors include, but
are not limited to: the tax and legal consequences of merging
Tongmei with Boyu and Jinmei, the lack of interest of private
equity funds in China to invest in Tongmei, the withdrawal,
cancellations or requests for redemptions by private equity funds
in China of investments in Tongmei, the timing of receipt of
private equity funds into Tongmei, the administrative challenges in
satisfying the requirements of various government agencies in China
in connection with the investments in Tongmei and the listing of
shares of Tongmei on the STAR Market, continued open access to
companies to list shares on the STAR Market, investor enthusiasm
for new listings of shares on the STAR Market and geopolitical
tensions between China and the United States. Additional
uncertainties and factors include, but are not limited to, the
timing and receipt of significant orders; the cancellation of
orders and return of product; emerging applications using chips or
devices fabricated on our substrates; end-user acceptance of
products containing chips or devices fabricated on our substrates;
our ability to bring new products to market; product announcements
by our competitors; the ability to control costs and improve
efficiency; the ability to utilize our manufacturing capacity;
product yields and their impact on gross margins; the relocation of
manufacturing lines and ramping of production; possible factory
shutdowns as a result of air pollution in China; COVID-19 or other
outbreaks of a contagious disease; tariffs and other trade war
issues; the financial performance of our partially owned supply
chain companies; policies and regulations in China; and other
factors as set forth in the company’s Annual Report on Form 10-K,
quarterly reports on Form 10-Q and other filings made with the
Securities and Exchange Commission. Each of these factors is
difficult to predict and many are beyond the company’s control. The
company does not undertake any obligation to update any
forward-looking statement, as a result of new information, future
events or otherwise.
Contacts:Gary FischerChief Financial
Officer(510) 438-4700
Leslie
Green Green
Communications Consulting, LLC(650) 312-9060
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