Scarcity in the upstream semiconductor materials supply chain continues to be a major theme.
On the evening of July 1, Shanghai Vital Deeptech Co., Ltd. (ASX: 600641) announced it would acquire control over indium phosphide assets from its controlling shareholder via a capital injection.
The Shanghai Stock Exchange swiftly issued an inquiry letter the same night, focusing on the reasonableness of the transaction's valuation and the payment arrangements.
In fact, several listed companies have recently moved to acquire indium phosphide assets, with their stock prices consistently rising around the announcements.
Prior to the official disclosure, Shanghai Vital Deeptech Co., Ltd. shares had already hit the daily price limit for two consecutive days, with institutional and retail investors prominently featured on the trading leaderboard.
The exchange's inquiry directly asked the company to clarify whether there had been any leakage of inside information.
On July 2, despite a significant pullback in the broader Shanghai Composite Index, Shanghai Vital Deeptech Co., Ltd. shares surged by the 10% limit again, closing at 48.24 yuan per share with a market capitalization reaching 45.68 billion yuan.
Acquisition Target Shows High Valuation Premium
According to the announcement, Shanghai Vital Deeptech Co., Ltd. signed an investment agreement with Qingyuan Vital Special Materials Co., Ltd. and Guangdong Vital Microelectronics Technology Co., Ltd.
The agreement stipulates an investment in the form of a capital increase into Guangdong Vital Microelectronics to obtain over 50% ownership and achieve control.
Corporate records show Qingyuan Vital Special Materials directly holds 85.93% of Guangdong Vital Microelectronics, making it the controlling shareholder.
The listed company's ultimate controller, Zhu Shihui, also controls Qingyuan Vital Special Materials, making this a connected transaction.
The specific amount of the capital injection and the corresponding equity stake have not yet been finalized.
Public information indicates Guangdong Vital Microelectronics was established in September 2020 and is China's first company to achieve mass production of 8-inch gallium arsenide and 6-inch indium phosphide substrates.
It possesses advanced production lines for 2- to 8-inch gallium arsenide and 2- to 6-inch indium phosphide substrates, with an annual capacity of 3.6 million pieces for gallium arsenide and 240,000 pieces for indium phosphide.
The company stated its main business is electronic materials.
In 2025, Guangdong Vital Microelectronics reported revenue of approximately 884 million yuan and a net profit of about 91.19 million yuan.
For the period from January to April this year, its revenue and net profit were 352 million yuan and 39.98 million yuan, respectively.
As of April 30, 2026, its net assets were approximately 847 million yuan.
The announcement indicated the preliminary estimated valuation of Guangdong Vital Microelectronics around the assessment date is about 2 billion yuan, implying a valuation premium exceeding 136%.
It is noteworthy that corporate records show Guangdong Vital Microelectronics introduced investors twice in a short period after entering 2026, including Shanghai Semiconductor Equipment & Materials Phase II Private Investment Fund Partnership.
This fund is connected to Shanghai Vital Deeptech Co., Ltd., as a subsidiary of the listed company's controlling shareholder, Vital Core (Shanghai) Technology Investment Co., Ltd., acts as the general partner managing the fund.
Investors in this fund include a company under the Jingdezhen State-owned Assets Supervision and Administration Commission, listed companies Changchuan Electronics and Shanghai Vital Deeptech Co., Ltd., as well as Vital Technology Group controlled by Zhu Shihui.
The exchange's inquiry letter first questioned the reasonableness of Guangdong Vital Microelectronics' valuation.
It required the listed company to quantitatively analyze the differences, specific reasons, and rationality of the valuation for this capital injection compared to its previous financing rounds.
It also demanded a comparison with recent market pricing for similar asset acquisitions to explain the transaction's fairness and reasonableness, and whether performance commitment clauses were established.
Regulatory Scrutiny on Deal Rationale Amid Losses
Originally named Wanye Enterprises, the company's controlling shareholder was Shanghai Pudong Science and Technology Investment Co., Ltd.
In November 2024, Vital Technology Group, controlled by Zhu Shihui, gained control of Shanghai Pudong Science and Technology Investment, thereby indirectly obtaining control of the listed company.
A year later, in November 2025, the company completed its industrial and commercial registration changes and changed its stock abbreviation from "Wanye Enterprises" to "Shanghai Vital Deeptech Co., Ltd.".
The company's core business shifted entirely from real estate to key segments across the semiconductor chain.
The company explained that "基" (Ji) refers to the semiconductor electronic materials supporting chip manufacturing, and "电" (Dian) connects the electronic functional properties of materials with the electrical control core of equipment, enabling synergistic operation across the "materials-components-equipment" spectrum.
According to its 2025 annual report, Shanghai Vital Deeptech Co., Ltd. added bismuth material sales, generating annual revenue of approximately 1.32 billion yuan, accounting for 71.27% of total revenue, with a gross margin of about 14.38%.
Bismuth's downstream applications now extend to semiconductors, pharmaceuticals, new energy, chemicals, the nuclear industry, and batteries.
During the process of divesting legacy assets and optimizing its structure, Shanghai Vital Deeptech Co., Ltd. reported a loss for 2025.
Annual revenue was approximately 1.85 billion yuan, a year-on-year increase of 218.5%, but net profit attributable to shareholders was a loss of about 127 million yuan, a decrease of 217.72%.
Net cash flow from operating activities was an outflow of 4.13 billion yuan for the year.
In the first quarter of this year, the pattern of increasing revenue without increasing profit continued, with revenue of about 535 million yuan, up 178.17% year-on-year, but a net loss attributable to shareholders of approximately 16.9 million yuan.
Amid this trend, the company's debt ratio has risen rapidly.
At the end of 2024, 2025, and Q1 2026, its asset-liability ratios were 12.93%, 28.35%, and 31.23%, respectively.
As of the end of Q1, the company held about 1.44 billion yuan in cash and cash equivalents, while having approximately 1.43 billion yuan in short-term debt and 390 million yuan in long-term borrowings, indicating tight cash flow.
Regarding the acquisition, Shanghai Vital Deeptech Co., Ltd. stated it would use its own and raised funds to complete the payment.
However, the exchange's inquiry still questioned the payment arrangements and rationale, requesting disclosure of the specific amounts and proportions of own versus raised funds.
It also demanded an assessment of the potential impact of the transaction on the company's cash flow and liquidity, considering both the acquisition and subsequent project investments.
Furthermore, the exchange required the company to explain, in light of its main business operations and development strategy, the reason and rationality for acquiring a stake in a target company with a different business from its core operations from the controlling shareholder via capital injection while being in a state of continuous losses.
It also asked whether this would adversely affect the company's ability to continue as a going concern.
Pre-Announcement Stock Surge Draws Insider Trading Concerns
Recently, capital market activities surrounding indium phosphide substrates have been frequent.
An industry analyst noted that very few domestic companies can achieve mass production of 4- to 6-inch indium phosphide, giving these assets strong uniqueness.
With the explosion in AI computing demand, the optical communication market's need for indium phosphide substrates continues to grow, creating a tight supply-demand structure.
Year-to-date, Shanghai Vital Deeptech Co., Ltd. shares have surged 173.47%.
Covering the hot indium phosphide theme, the stock recently achieved three consecutive limit-up sessions.
It is important to note that before the company disclosed the announcement about controlling Guangdong Vital Microelectronics, its share price had already hit the limit-up on June 30 and July 1.
Trading data for July 1 showed a turnover rate of 13.6%.
Major buyers included Guotai Haitong Securities Headquarters, Goldman Sachs (China) Securities Shanghai Pudong New Area Century Avenue, and UBS Securities Shanghai Garden Shiqiao Road.
Common trading seats for retail investors, such as J.P. Morgan Securities (China) Shanghai Yincheng Middle Road and Guotai Haitong Securities Shanghai Songjiang District Zhongshan East Road, also featured prominently among the top buyers.
On the evening of July 1, due to its stock price deviating by over 20% cumulatively across two trading days, Shanghai Vital Deeptech Co., Ltd. issued a stock trading anomaly announcement.
The exchange's inquiry letter addressed information disclosure and insider information management.
It required the company to supplement disclosure of the specific process of the acquisition, including transaction steps, progress, key timelines, and the scope of personnel informed.
It also demanded a comprehensive self-inspection and verification of recent stock trading by insiders including the controlling shareholder, ultimate controller, directors, senior management, the transaction counterparty, and other relevant parties to clarify whether inside information was leaked in advance.
Regarding the stock's pre-announcement surge, the analyst suggested that Guangdong Vital Microelectronics' multiple equity changes this year and the involvement of external institutions may have intensified information dissemination.
Simultaneously, the injection of such sensitive assets can easily trigger speculative positioning by funds in advance.
The regulatory inquiry aims to examine the transaction's compliance, prevent improper benefit transfers, and ensure fair information disclosure.
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