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A sign for Star Market, China's Nasdaq-style tech board, is seen before the listing ceremony of the first batch of companies at Shanghai Stock Exchange (SSE) in Shanghai, China July 22, 2019. Photo: Reuters

Chinese AI start-up Cambricon to raise US$367.7 million through IPO on Shanghai’s Star Market

  • Cambricon, one of China’s most valuable AI chip start-ups, has set a listing price of 64.39 yuan per share on Shanghai’s Star Market
  • It is offering 40.1 million new shares through the listing, or about 10 per cent of its total shares after the IPO
Cambricon Technologies, one of China’s most valuable artificial intelligence (AI) chip start-ups, said it will raise 2.58 billion yuan (US$367.7 million) in its Shanghai initial public offering, after setting the listing price at 64.39 yuan per share.
The company is offering 40.1 million new shares through its listing on Shanghai’s Star Market, according to its prospectus released on Tuesday. This will make up about 10 per cent of its total shares after the IPO, the prospectus added.

Cambricon’s IPO values the company at 25.7 billion yuan, or 58.03 times its 2019 earnings, above the average price-to-sales ratio of 34.54 for five of its China-listed peers, according to the prospectus.

The Beijing-based company did not immediately respond to a request for comment.

Founded by brothers Chen Yunji and Chen Tianshi in 2016, Cambricon’s chips have been used to power nearly 100 million smartphones and servers including those by Huawei Technologies and the Post’s parent company, Alibaba Group Holding, the Chinese Academy of Sciences said last year.

Meet the brothers who put AI chips in 100 million devices

Cambricon’s announcement comes days after China’s top chip maker Semiconductor Manufacturing International Corporation (SMIC) announced that it will raise 46.29 billion yuan, more than double its initial target, through its listing on Star Market, in what is expected to be China’s largest offering in 10 years.
Growing tensions between Beijing and Washington are prompting increasing numbers of Chinese firms to ditch the US market in favour of alternative venues to raise capital. The US is weighing tighter scrutiny on Chinese firms’ plans to go public in the US, with New York-based Nasdaq already planning new rules that would make it harder for Chinese companies to list in the US.
Hong Kong is the favoured destination for Chinese tech firms’ secondary listings so far, with NetEase and being the latest to raise money there. But Star Market, which waives the Shanghai main board’s requirement that new issuers are profitable, is steadily dimming the Hong Kong market’s appeal.

Launched in July 2019 as a way for China to offer fast-track financing to promising technology start-ups, tech-heavy Star Market has attracted more than 100 companies since its launch, according to big four firm PwC. It has seen 46 listings, bringing in 50.8 billion yuan in funding, in the first half of the year.

However, even with the listing, it is “still not clear” how Cambricon will break even, said EqualOcean analyst Ivan Platonov, who cited competitors downstream, the company’s “rather bleak client pool” and the “fading interest in AI within the application layer globally”.

“It seems that, under the current situation, Cambricon's future will be mainly shaped by its business development power, not by R&D capabilities,” he added.