Written by: Forbes

Translated by: AididiaoJP, Foresight News

Changxin Storage (CXMT) is the largest IPO in Asia so far this year. Overseas investors are unable to participate directly and can only turn to the crypto market for opportunities.

The most accurate valuation of the recent IPO of China's largest memory chip manufacturer does not come from Shanghai. It actually originates from a derivatives market that Chinese law does not recognize, set up in a trading venue that mainland Chinese investors cannot legally access, and it was published 12 days before the official stock existed.

On July 15, a small protocol called Trade.xyz launched a synthetic market for Changxin Storage using Hyperliquid's permissionless listing framework. The closing price on the first trading day was $7.42 per share.

12 days later, on July 27, Changxin Storage opened on the Shanghai Stock Exchange at 49.50 yuan (approximately $7.32). The underwriters — those institutions with audited financial statements and regulatory authorization — set the issue price at 8.66 yuan, which is 82.5% lower than the actual opening price. In contrast, this market with no legal status had a deviation of only 1.4%.

Before anyone announced that the book-building system is outdated, it must be clarified that this contract did not remain accurate throughout. It deviated over 10 trading days, with a low point 16% below the final opening price and still 9.5% lower at the time of opening. Its most accurate guess was the first, not the last.

Even so, a similar case occurred this May with Cerebras: the crypto market was only 1.3% away from the cash opening price, while the underwriter was 47% lower.

The Market That Built the Wall

Changxin Storage is the largest IPO in Asia this year, and almost no one outside of China can buy a single share. Northbound trading through the Shanghai-Hong Kong Stock Connect allows for the inclusion of companies in the Shanghai 180 or 380 indices or those listed on the Hong Kong Stock Exchange. A company that was just established two days does not meet either condition. Even within China, retail investors need assets of 500,000 yuan to trade on this board.

As a result, demand flowed to where blocked demand always tends to go. Six crypto exchanges launched some form of CXMT-related contracts, with Hyperliquid accounting for 92% of open contracts. Binance did not participate, even though it operated a SpaceX-related market in May; even on Hyperliquid, only one of the nine builders deployed this contract. But that one builder had many willing trading counterparties.

The Price Is a Prediction, Not Manipulation

Many now claim that offshore traders drove up the CXMT price on the Shanghai Stock Exchange. They did not and could not.

These derivatives contracts are cash-settled, and no shares will be delivered to China. The peak of open contracts reached nearly $79 million, while this fundraising size was $8.55 billion, making up far less than 1%. Moreover, the real decision makers for the CXMT price in Shanghai are mainland retail investors, and Hyperliquid remains illegal for them.

More evidence emerged on the second trading day: global memory stocks plummeted. Kioxia fell 17%, SanDisk fell 15%, SK Hynix fell 13%, Micron fell 9%. Another Chinese memory company listed in Shanghai, Zylox Innovation, also fell 16%. CXMT, on the same window, rose by 1%.

Figure 2 shows the price changes in the global memory sector from the closing on July 27 to the closing on July 29, compared to CXMT. (The CXMT price is calculated from the Trade.xyz contract oracle, which deviated from the official Shanghai closing price by less than 0.3% on the previous trading day.) Data source: Hyperliquid, Trade.xyz.

Meanwhile, five offshore venues pricing CXMT all quoted it 3% to 5% below the Shanghai closing price, with each funding rate turning negative, and Hyperliquid reached as high as 6.5% annualized.

The argument is that foreign capital hopes for a lower CXMT, but they have no way to deliver shares to Shanghai to achieve that. Therefore, all the pressure enters the basis and stays there, with longs paying a high price to hold counterpart positions. Capital controls have not been circumvented but rather repriced.

What SpaceX Has Taught Us

Six weeks ago, the same mechanism operated on SpaceX and roughly guessed the first-day performance. Then it continued to go down.

SpaceX's issue price was $135, with a first-day close of $161. The pre-listing market price was $155, which can be considered a success. Four days later, the same contract reached $228.74, which is 69% higher than the issue price.

Since then, SPCX has been falling almost weekly, dipping below its IPO price in mid-July, and trading at $115.68 at the time of publication. Those who bought at the first-day closing price lost 28%, while those who entered at early prices of $200 lost 42%.

Figure 3 shows the trend of SpaceX from the pre-listing market launch to now, compared to the IPO price of $135. The light color line represents synthetic predictions, and the solid line begins when the stock officially listed on June 12 (1-day K-line). Data source: Hyperliquid, Trade.xyz.

Structural differences are more important than the numbers themselves. Nasdaq stocks can be held by custodians, so tokenized SpaceX can be traded in parallel with perpetual contracts while remaining anchored.

CoinMarketCap Research found that the tokenized SPCX closely tracks the issue price of $135, while derivatives trades 30% higher. But A shares cannot be held offshore at all. Buyers of SpaceX get a claim to the company, whereas buyers of CXMT can only place a bet.

The Risks That No One Names

The real danger lies in discretion. Trade.xyz arbitrarily set the opening reference price for CXMT at $5 without disclosing the basis; established a boundary that produced a first-day maximum of $8.64; pressed the pre-listing funding rate to normal intensity of about 1%, shutting down regular damping mechanisms; and retained the right to settle on a time-weighted average if there is a delay in listing. One entity holds all the leverage.

At the same time, regulation is tightening on both sides. The Chicago Mercantile Exchange and the New York Stock Exchange have requested Washington to review Hyperliquid, while Chinese securities regulators initiated a two-year crackdown on illegal cross-border trading in May, imposing fines exceeding $330 million on three offshore brokerages. However, there has been no mention of the market that first priced its national champion enterprises.

These crypto trading venues excel at guessing where a stock will open but are not good at knowing what it is really worth. CXMT is an advertisement, SpaceX is a receipt. Obtaining a price never equates to obtaining a return.