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SEC Threatens to Delist 5 Chinese Stocks: One US-Based Name Is Now Looking At A Rare 100%+ Upside
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The time to reopen your portfolio to the over suppressed Chinese public equities is now, with Biden's administration making clear efforts to resume its alliance with Beijing (after years of political turmoil). At the same time, China's overdue economic recovery commences as its central bank goes against the global inflation grain, lowering its benchmark rates to further promote this economic expansion.
China's growth-focused economy is putting everything they have into building out its semiconductor capabilities with an unbelievable 33.3% spike in chip production in 2021 despite some self-inflicted economic headwinds.
Despite the obvious near-term economic speedbump that the Russia-Ukraine conflict has caused, the opportunity in China's chip segment is undeniable, with analysts projecting the nation will generate a sizable 15% CAGR over the next 5 years. The Chinese communist regime will continue its dedicated investments to expand its still nascent semiconductor market. Technological self-sufficiency is becoming essential as globalization begins to reverse.
I've got one undiscovered player with near-term return potential that you don't want to miss out on.
ACM Research (ACMR - Free Report) is a niche under-the-radar small-cap semiconductor player with an ideal concentrated exposure in Asia, enabling it to take advantage of this project shift in international equity returns while riding the endless wave of chip-focused demands.
ACMR provides substantial upside potential at the stock's currently overlooked small-cap valuation, with its rapidly accelerating chipmaking capacity and strategic Chinese exposure being the primary buy catalyst.
ACM Research is a global leader in semiconductor equipment. As chip manufacturers in Asia begin ramping up production, ACM's best-in-class chipmaking equipment is poised to take flight following a year and a half of sideways trading action.
Chip demands far surpassing current production capacities entering the digital renaissance of the 4th Industrial Revolution, positioning this business to explode as the Roaring 20s recommence.
Delisting Risk & Post-Selloff Opportunity
Chinese stocks have been hammered for nearly a year now, as President Xi and his increasingly autocratic communist administration crackdown on the swelling wealth in its booming tech sector. Xi's fear of losing control of "his" nation to a wealthy group of elites is reminiscent of Mao Zedong's totalitarian regime.
Chinese tech stocks which had rattled by regulatory headwinds in China since early 2021 are now facing delisting threats from US exchanges.
ACM Research fell off a formidable -43% cliff since being directly named by the SEC as one of five Chinese stocks trading in the US’s public markets that faces potential de-listing if they do not comply with the Holding Foreign Companies Accountable Act (HFCAA) by March 28th (just over 2 weeks).
Effectively, the market immediately ACMR an over 30% chance of not complying with the SEC, but many analysts view this probability to be much closer to 0%. In fact, I see this SEC call out as net-positive for ACMR longer-term, with more traders in play (highest daily volume in over two years) and more investor/analyst eyes on its financial statements than ever before. I expect the shares to climb into the $100s over the course of the next 12-months with more investor awareness than ever before.
This opened up an excellent buying opportunity which I am taking advantage of in my personal portfolio, as ACM Research has already plainly stated its plans to comply with the SEC’s new auditing ruling, and this egregiously overplayed pre-stock split selloff presents a brilliant dip-buying play.
HFCAA was enacted on December 2nd, 2022, and on the 7th (less than a week later) AMCR publicly released the steps it would take to comply with this new legislation, despite the company being US-based.
ACM Research quickly responded to the SEC’s recent (unwarranted) delisting threat with a press release that reiterated the compliance approach that they had already stated over three months prior:
On March 8, 2022, the SEC published its first “Provisional list of issuers identified under the HFCAA.” ACM was identified on the SEC’s provisional list after ACM filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which includes an audit report issued by a public accounting firm that the PCAOB is unable to inspect because of regulations in China.
ACM appeared relatively early on the SEC’s provisional list after the filing of its Annual Report on Form 10-K on March 1, 2022. ACM anticipates additional companies with relatively later filing schedules will appear on subsequent provisional lists as those companies file their respective annual reports. ACM’s appearance on the provisional list does not mean ACM will be delisted soon, or at all. According to SEC guidelines, the earliest a trading prohibition could be invoked is 2024, once an issuer has appeared on the SEC’s provisional lists for three consecutive years, 2022, 2023 and 2024.
Moreover, ACM is implementing plans to identify and appoint an independent public accounting firm that is subject to inspection by the PCAOB, in order that in the future ACM will no longer appear on the SEC’s provisional lists and will no longer be subject to the related delisting guidelines. “ACM has already begun to interview potential U.S. auditors to comply with the guidelines,” said Dr. David Wang, President and Chief Executive Officer of ACM. “As we announced on December 7, 2021, we are confident in our ability to meet the SEC requirements in advance of the 2024 deadline, and we remain committed to our NASDAQ listing status.”
ACMR has seen its forward price-to-earnings multiple recede from 75x to 25x (with a topline growth outlay of 50%+ in the next two years), presenting some superior long-term prospects as the global economy reemerges from the pandemic with a digitally fueled ambition.
The China Catalyst
ACM Research is a US-based capital equipment firm. Yet, its most prominent customers are based in mainland China, with another nearly 10% of its sales going to a South Korean chip innovator. Over the past 5 years, China and Korea have seen their semiconductor spaces drive compounded annual revenue growth of 20.7% & 19.5% and have become the epicenter of future development for ACMR.
As ACM Research takes advantage of the booming demand, this chip equipment powerhouse is rapidly ramping up its own equipment production capacity and capabilities (more offerings) in the region. The company has several new expansion projects for organic growth that will continue to fuel this stock's growth in 2022.
ACMR remains small-cap equity with a market value of around $1.6 billion. However, with the company’s unbelievable ability to drive what appears to be boundless profitable growth (compounded annual growth rate (CAGR) of 50% in the past 3 years), the SEC’s recent spotlight (coupled with the baseless opportunity-driving selloff that followed), and a place in Morgan Stanley's shortlist of 2022 chip picks, it's only a matter of time before the broader market starts taking advantage of the unique value narrative here.
I expect value-seeking investors to lift ACMR out of its small-cap shadow and into the large-cap limelight. The Russia-Ukraine conflict has the world looking to nationalize chip production, which is accelerating government-supported subsidization and investment capital to expand domestic capacities. ACMR is perfectly positioned to be a significant beneficiary of this semiconductor-production catalyzer not just in China but across the world.
Final Thoughts
ACMR is now trading over -60% off the highs it touched in February of 2022 and egregiously below analysts’ most recent price targets. The SEC’s singled-out threat of delisting had ACMR shareholders jumping ship, but analysts were getting more bullish than ever on the buying opportunity this presented.
ACMR analysts across the board reiterated upside price targets of between $100 and $140 (representing potential returns of 100% to 200% over the next 12 to 18 months) following the SEC’s delisting warning, with these most recent reports showing little to no concern about ACMR actually being pulled from US exchanges. 6 out of 6 analysts are calling ACMR a buy today and I couldn’t agree more.
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SEC Threatens to Delist 5 Chinese Stocks: One US-Based Name Is Now Looking At A Rare 100%+ Upside
The time to reopen your portfolio to the over suppressed Chinese public equities is now, with Biden's administration making clear efforts to resume its alliance with Beijing (after years of political turmoil). At the same time, China's overdue economic recovery commences as its central bank goes against the global inflation grain, lowering its benchmark rates to further promote this economic expansion.
China's growth-focused economy is putting everything they have into building out its semiconductor capabilities with an unbelievable 33.3% spike in chip production in 2021 despite some self-inflicted economic headwinds.
Despite the obvious near-term economic speedbump that the Russia-Ukraine conflict has caused, the opportunity in China's chip segment is undeniable, with analysts projecting the nation will generate a sizable 15% CAGR over the next 5 years. The Chinese communist regime will continue its dedicated investments to expand its still nascent semiconductor market. Technological self-sufficiency is becoming essential as globalization begins to reverse.
I've got one undiscovered player with near-term return potential that you don't want to miss out on.
ACM Research (ACMR - Free Report) is a niche under-the-radar small-cap semiconductor player with an ideal concentrated exposure in Asia, enabling it to take advantage of this project shift in international equity returns while riding the endless wave of chip-focused demands.
ACMR provides substantial upside potential at the stock's currently overlooked small-cap valuation, with its rapidly accelerating chipmaking capacity and strategic Chinese exposure being the primary buy catalyst.
ACM Research is a global leader in semiconductor equipment. As chip manufacturers in Asia begin ramping up production, ACM's best-in-class chipmaking equipment is poised to take flight following a year and a half of sideways trading action.
Chip demands far surpassing current production capacities entering the digital renaissance of the 4th Industrial Revolution, positioning this business to explode as the Roaring 20s recommence.
Delisting Risk & Post-Selloff Opportunity
Chinese stocks have been hammered for nearly a year now, as President Xi and his increasingly autocratic communist administration crackdown on the swelling wealth in its booming tech sector. Xi's fear of losing control of "his" nation to a wealthy group of elites is reminiscent of Mao Zedong's totalitarian regime.
Chinese tech stocks which had rattled by regulatory headwinds in China since early 2021 are now facing delisting threats from US exchanges.
ACM Research fell off a formidable -43% cliff since being directly named by the SEC as one of five Chinese stocks trading in the US’s public markets that faces potential de-listing if they do not comply with the Holding Foreign Companies Accountable Act (HFCAA) by March 28th (just over 2 weeks).
Effectively, the market immediately ACMR an over 30% chance of not complying with the SEC, but many analysts view this probability to be much closer to 0%. In fact, I see this SEC call out as net-positive for ACMR longer-term, with more traders in play (highest daily volume in over two years) and more investor/analyst eyes on its financial statements than ever before. I expect the shares to climb into the $100s over the course of the next 12-months with more investor awareness than ever before.
This opened up an excellent buying opportunity which I am taking advantage of in my personal portfolio, as ACM Research has already plainly stated its plans to comply with the SEC’s new auditing ruling, and this egregiously overplayed pre-stock split selloff presents a brilliant dip-buying play.
HFCAA was enacted on December 2nd, 2022, and on the 7th (less than a week later) AMCR publicly released the steps it would take to comply with this new legislation, despite the company being US-based.
ACM Research quickly responded to the SEC’s recent (unwarranted) delisting threat with a press release that reiterated the compliance approach that they had already stated over three months prior:
On March 8, 2022, the SEC published its first “Provisional list of issuers identified under the HFCAA.” ACM was identified on the SEC’s provisional list after ACM filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which includes an audit report issued by a public accounting firm that the PCAOB is unable to inspect because of regulations in China.
ACM appeared relatively early on the SEC’s provisional list after the filing of its Annual Report on Form 10-K on March 1, 2022. ACM anticipates additional companies with relatively later filing schedules will appear on subsequent provisional lists as those companies file their respective annual reports. ACM’s appearance on the provisional list does not mean ACM will be delisted soon, or at all. According to SEC guidelines, the earliest a trading prohibition could be invoked is 2024, once an issuer has appeared on the SEC’s provisional lists for three consecutive years, 2022, 2023 and 2024.
Moreover, ACM is implementing plans to identify and appoint an independent public accounting firm that is subject to inspection by the PCAOB, in order that in the future ACM will no longer appear on the SEC’s provisional lists and will no longer be subject to the related delisting guidelines. “ACM has already begun to interview potential U.S. auditors to comply with the guidelines,” said Dr. David Wang, President and Chief Executive Officer of ACM. “As we announced on December 7, 2021, we are confident in our ability to meet the SEC requirements in advance of the 2024 deadline, and we remain committed to our NASDAQ listing status.”
ACMR has seen its forward price-to-earnings multiple recede from 75x to 25x (with a topline growth outlay of 50%+ in the next two years), presenting some superior long-term prospects as the global economy reemerges from the pandemic with a digitally fueled ambition.
The China Catalyst
ACM Research is a US-based capital equipment firm. Yet, its most prominent customers are based in mainland China, with another nearly 10% of its sales going to a South Korean chip innovator. Over the past 5 years, China and Korea have seen their semiconductor spaces drive compounded annual revenue growth of 20.7% & 19.5% and have become the epicenter of future development for ACMR.
As ACM Research takes advantage of the booming demand, this chip equipment powerhouse is rapidly ramping up its own equipment production capacity and capabilities (more offerings) in the region. The company has several new expansion projects for organic growth that will continue to fuel this stock's growth in 2022.
ACMR remains small-cap equity with a market value of around $1.6 billion. However, with the company’s unbelievable ability to drive what appears to be boundless profitable growth (compounded annual growth rate (CAGR) of 50% in the past 3 years), the SEC’s recent spotlight (coupled with the baseless opportunity-driving selloff that followed), and a place in Morgan Stanley's shortlist of 2022 chip picks, it's only a matter of time before the broader market starts taking advantage of the unique value narrative here.
I expect value-seeking investors to lift ACMR out of its small-cap shadow and into the large-cap limelight. The Russia-Ukraine conflict has the world looking to nationalize chip production, which is accelerating government-supported subsidization and investment capital to expand domestic capacities. ACMR is perfectly positioned to be a significant beneficiary of this semiconductor-production catalyzer not just in China but across the world.
Final Thoughts
ACMR is now trading over -60% off the highs it touched in February of 2022 and egregiously below analysts’ most recent price targets. The SEC’s singled-out threat of delisting had ACMR shareholders jumping ship, but analysts were getting more bullish than ever on the buying opportunity this presented.
ACMR analysts across the board reiterated upside price targets of between $100 and $140 (representing potential returns of 100% to 200% over the next 12 to 18 months) following the SEC’s delisting warning, with these most recent reports showing little to no concern about ACMR actually being pulled from US exchanges. 6 out of 6 analysts are calling ACMR a buy today and I couldn’t agree more.