AXT, Inc. filed a current report on October 28, 2026, disclosing that its subsidiary Beijing Tongmei Xtal Technology Co., Ltd. entered into Share Subscription and related agreements on October 27, 2026, providing for an institutional investment of between RMB 1,912,350,000 and RMB 3,668,639,053.25 in Tongmei ordinary shares.

Key Highlights

  • Investment range: The Agreements provide for a minimum investment of RMB 1,912,350,000 (approximately US$285 million) and a maximum of RMB 3,668,639,053.25 (approximately US$545 million) in Tongmei ordinary shares.
  • AXT recapitalization: AXT agreed to subscribe for 342,998,797 ordinary shares of Tongmei for the RMB equivalent of US$400 million on or prior to the closing.
  • Post-transaction AXT ownership: Assuming the Maximum Amount is invested, AXT will own approximately 73.40% of Tongmei following consummation of the transaction.
  • Qualified IPO target: All parties agreed to use their reasonable best efforts to achieve a Qualified IPO of Tongmei, defined as a first underwritten public offering on a qualified exchange at a price enabling each Investor to achieve at least a 13% annual internal rate of return, compounded annually.
  • Termination deadline: If closings for the Minimum Amount have not occurred by December 20, 2026, the Share Subscription Agreement will terminate, subject to a possible extension if governmental approvals remain pending.
  • Board representation: The Lead Investor will have the right to nominate one director to Tongmei's nine-member board; AXT will nominate the other eight directors.
  • Intended use of proceeds: Tongmei intends to use the proceeds for expansion of manufacturing capacity for indium phosphide semiconductor substrates, expansion of principal business operations, capital expenditures, and general working capital.

Tongmei Share Subscription Agreements: Structure, Rights, and Conditions

According to the filing, AXT, Inc. (NASDAQ:AXTI) and its subsidiary Tongmei entered into a Share Subscription Agreement, a Supplemental Agreement (Investor's Rights Agreement), and a Redemption Support Agreement on October 27, 2026, with BNK-B3 HK Holdings Limited, described as managed by a leading Asia asset manager and serving as the Lead Investor, along with certain other institutional investors, including one that is an affiliate of an existing customer. The Agreements are subject to customary closing conditions, including receipt of required filings from applicable governmental authorities.

The filing discloses that Investors will have a liquidation preference on a sale or liquidation of Tongmei and priority on Tongmei profit distributions, as well as certain preemptive rights if Tongmei proposes to issue additional securities. Each Investor also has the right, but not the obligation, to require Tongmei to redeem its shares under defined conditions, including if Tongmei has not completed a Qualified IPO by the three-year anniversary of the closing date, or if certain material breaches, criminal convictions, or change-of-control events occur. The per-share redemption price is calculated as the original subscription price plus a return at a per annum rate of 8%, compounded annually, plus any declared but unpaid dividends or distributions.

Under the Redemption Support Agreement, the filing states that AXT may, but is not obligated to, elect to purchase an Investor's shares at the redemption price instead of Tongmei, with payment options including cash, an unsecured promissory note, shares of AXT common stock valued at the volume-weighted average price on Nasdaq over the 90 consecutive trading days ending before the exit date, or a combination. The filing notes that any promissory note would bear interest at the same 8% per annum Applicable Rate and that AXT must prepay, nine months after issuance, the lesser of the note principal amount and 100% of the Investor's original subscription amount. The filing states: "No assurance can be given that the Investors will invest the Maximum Amount, or that any closing will occur."

What Was Disclosed

AXT, Inc. disclosed that Tongmei and AXT entered into investment agreements on October 27, 2026, for an institutional equity raise of up to approximately US$545 million in Tongmei, alongside an AXT recapitalization commitment of approximately US$400 million, with proceeds earmarked for manufacturing expansion and working capital.