The latest: Polysilicon maker Daqo New Energy Corp. (DQ.US) announced  Thursday its subsidiary, Xinjiang Daqo New Energy Co. Ltd. (688303.SH), has received approval from the China Securities Regulatory Commission for its planned private share offering in China’s A-share market to no more than 35 institutional investors.

Looking up: The private offering will raise 11 billion yuan ($165 million) for Xinjiang Daqo, of which approximately 8 billion yuan will be used for a 100,000 metric tons of polysilicon expansion project in Baotou City, Inner Mongolia, China, and the rest of the proceeds for working capital. 

Take Note: While investors are worried that polysilicon prices are peaking and falling, it may not be the right time for Xinjiang Daqo to expand its production capacity.

Digging Deeper: Daqo New Energy spun off Xinjiang Daqo in July last year and successfully raised about 6.5 billion yuan on the Shanghai STAR Market. This is one of the many examples of Chinese companies listed in the U.S. that have listed their subsidiaries on the “Shanghai version of Nasdaq” to achieve better valuations and reduce regulatory risk. As a subsidiary, Xinjiang Daqo is currently valued at 130 billion yuan, more than three times the $4.5 billion (30 billion yuan) of its parent company, reflecting the huge valuation gap developing between Chinese companies listed in the U.S. and those listed in China in recent years.

Market Reaction: Shares of Daqo New Energy sank 4.2% to $60.99 in New York on Thursday. Xinjiang Daqo fell – and then rose – on Friday morning in Shanghai, closing up 1.1% to $68.08 at the midday break, in the middle of its range for the past 52 weeks.

Translation by Jony Ho

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