AXT Announces Strategic Plan to Access China’s Capital Markets

Subsidiaries Take First Step Towards an IPO in China
Private Equity Round Underway

• Process initiated to list shares of subsidiary, Tongmei, on China’s STAR Market
• Two raw material companies to be merged into Tongmei
• Definitive agreements executed for initial private placement of shares of Tongmei to meet listing requirements
• AXT to maintain its Nasdaq listing; its Fremont, Calif. headquarters; and its focus on global opportunities
• Conference call to discuss the announcement today at 2:30 pm PT. Details included in this release
  

FREMONT, Calif., Nov. 16, 2020 (GLOBE NEWSWIRE) -- 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.