What happened

Shares of semiconductor company AXT (NASDAQ:AXTI) surged by as much as 27.3% Tuesday. As of 3:10 p.m. EST, the stock was up by 21.2%

The stock's gain followed the tech company's announcement of a strategic plan that will help it access China's capital markets and improve its cash position.

A chart showing a stock price moving higher

Image source: Getty Images.

So what

As part of a complex deal, which investors can read about in full on the company's investor relations website, AXT will merge two of its raw material companies into its wafer manufacturing subsidiary in China, Beijing Tongmei Xtal Technology. AXT will then list shares of this subsidiary on the Shanghai Stock Exchange's STAR Market -- "an exchange intended to support innovative companies in China," explained AXT in its press release about the deal. 

"Pursuing a listing on the STAR Market gives us the ability to replenish our cash and increase our market value for our shareholders with minimal dilution," said AXT CEO Morris Young. "Further, the additional capital will strengthen our ability to compete for larger business opportunities."

Several analyst upgrades may have also contributed to the stock's  move higher. Following the deal announcement, Craig-Hallum and BWS Financial increased their price targets on AXT from $7.50 and $10 to $12 and $14, respectively.

Now what

Notably, going public on the STAR Market takes time. AXT, therefore, doesn't expect to list shares of this subsidiary until mid-2022. In addition, the deal will be subject to regulatory approval and other merger requirements.

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