$ACMR EXECUTIVE OVERVIEW:
The Kerrisdale Capital Management and Steamboat Capital Partners letter is a constructive, capital-markets-oriented activist intervention designed to accelerate value recognition in ACM Research by reducing the valuation gap between Nasdaq-listed ACM Research, Inc. and Shanghai STAR Market-listed ACM Research (Shanghai), Inc. The proposal is not a conventional governance fight, proxy contest, or operating turnaround demand. It is a market-structure arbitrage thesis: the same consolidated operating business is effectively being valued at materially different levels in 2 non-fungible public markets, and the activists are pressing for a Hong Kong listing architecture that could make the valuation gap more visible, more tradable, and potentially less durable. The letter supports ACM Shanghai’s proposed H-share listing in Hong Kong, but it also advances a more direct and arguably more powerful alternative: a Hong Kong listing of ACM Research, Inc. shares themselves, structured so that Hong Kong-listed shares are fully fungible with Nasdaq-listed ACMR shares. Kerrisdale and Steamboat state that they collectively own or advise entities owning approximately 600,000 ACMR shares and would each commit at least $20m, and potentially up to $100m collectively, as anchor capital for a Hong Kong offering of ACMR shares at the current valuation, with willingness to accept a customary lock-up. 
The proposed action is strategically rational because ACMR’s current U.S. market capitalization remains substantially below the gross look-through market value of its 73.7% ownership in ACM Shanghai. ACM Research disclosed that after selling approximately 4.8m ACM Shanghai shares at RMB160 per share on February 6, 2026, its ACM Shanghai ownership declined from 74.8% to 73.7%; ACM Shanghai’s current market capitalization is approximately CNY75.05B, while ACMR’s current U.S. market capitalization is approximately $3.69B. Using an approximate USD/CNY exchange rate near 6.88, ACMR’s 73.7% stake in ACM Shanghai implies a gross look-through value of roughly $8.0B before taxes, holding-company friction, capital controls, governance discounts, and monetization constraints. This implies that ACMR trades at roughly a 54% discount to its gross ACM Shanghai stake value, excluding any incremental value or liabilities at the parent level. 
The rationale is reinforced by the A/H share framework. The Hang Seng Stock Connect China AH Premium Index recently stood near 118.80, implying that A shares were trading at an approximate 18.8% premium to H shares, or that H shares were trading at an approximate 15.8% discount to comparable A shares on an index basis. That level of A/H discount is meaningfully smaller than ACMR’s current gross discount to its ACM Shanghai stake. The activists’ central claim is therefore economically coherent: if ACM Shanghai H shares or fungible ACMR Hong Kong shares were priced closer to typical H-share/A-share relationships, ACMR’s current discount could narrow materially. However, the conclusion is not mechanically guaranteed because ACMR shareholders do not directly own ACM Shanghai shares, ACM Shanghai H shares would not automatically be fungible with A shares, and the parent-company discount reflects real legal, geopolitical, liquidity, tax, control, and capital-repatriation risks. 
The most important investment implication is that the Kerrisdale/Steamboat letter introduces a credible special-situations catalyst into a stock already supported by a fundamental growth narrative but challenged by margin, OpEx, and working-capital concerns. Needham’s February 2026 report maintained a Hold rating after Q4 2025, emphasizing that 25% revenue growth was reaffirmed but that non-GAAP gross margin missed by approximately 400 bps versus Needham’s estimate and approximately 330 bps versus Street expectations, while higher OpEx reduced 2026 and 2027 EPS estimates. JPMorgan’s March 2026 report remained Overweight with a $70 target, emphasizing international customer wins, advanced packaging prospects, ACM Shanghai monetization, and further rerating potential despite 2H25-1H26 margin headwinds. The activist letter increases the probability that the stock is evaluated through a sum-of-the-parts and capital-markets lens rather than solely through near-term EPS, but it does not eliminate the need for execution on gross margin recovery, shipment conversion, new product acceptance, and cash-flow improvement.  
WHAT THE LETTER IS ACTUALLY PROPOSING:
The letter proposes 2 related but distinct paths. The 1st path is to proceed with ACM Shanghai’s previously disclosed H-share issuance and HKEX listing. This would create publicly tradable shares of ACM Shanghai in Hong Kong, giving global investors an offshore equity line in the China operating subsidiary. That route would broaden the investor base for ACM Shanghai, provide an internationally accessible valuation reference, and potentially create a platform for future corporate actions, but it would not by itself create direct ownership of ACM Shanghai for ACMR shareholders. The 2nd path is more aggressive and more directly relevant to ACMR shareholders: ACM Research, Inc. could pursue a Hong Kong public offering and listing of parent-company shares, with the Hong Kong-listed shares fully fungible with Nasdaq-listed ACMR shares. In that structure, U.S. shareholders could potentially convert Nasdaq shares into Hong Kong shares if the Hong Kong line traded at a higher valuation, thereby creating a more direct cross-market arbitrage mechanism. 
The activists are not merely recommending a transaction; they are also offering to de-risk it. A public statement of willingness to invest at least $20m each and up to $100m collectively is intended to function as an anchor-investor signal. In a Hong Kong offering, credible anchor or cornerstone demand can improve execution certainty, validate pricing, and help other investors underwrite the transaction. The offer is also tactically designed to reduce management’s ability to argue that a parent-company Hong Kong listing would lack sufficient institutional demand. At the current ACMR market capitalization, a $100m potential anchor commitment would represent approximately 2.7% of equity value, which is not transformative for the balance sheet but is meaningful as an offering signal. The commitment is still best interpreted as a public indication of interest rather than a binding financing commitment, since the letter does not describe definitive purchase agreements, conditions precedent, underwriters, pricing mechanics, regulatory approvals, or closing terms. 
ACM Shanghai’s own H-share proposal is still early-stage. ACM Research disclosed on April 17, 2026 that ACM Shanghai was proposing to issue overseas-listed H shares and apply for listing on HKEX. The disclosed objectives were to deepen strategic development, expand international markets, strengthen the capital base, attract and retain talent, enhance competitiveness, and consolidate international-market positioning. The same filing indicated that specific terms had not been determined, that ACM Shanghai was still discussing steps with intermediaries, that the H-share listing would not change ACM Shanghai’s controlling shareholder or actual controller, and that approvals or filings would be required from regulators including the CSRC, HKEX, and Hong Kong’s SFC. The uncertainty language is important because the letter is reacting to a preliminary process, not a definitive listing timetable. 
RATIONALE BEHIND THE PROPOSED STRATEGY:
The proposed strategy is grounded in the economic separation between ownership and tradability. ACM Research owns the majority of ACM Shanghai, and ACM Shanghai represents substantially all of ACM Research’s operating value. However, ACMR shareholders do not directly own ACM Shanghai shares, and the 2 stocks trade in segmented investor pools: ACMR in the U.S. under a China-linked holding-company discount, and ACM Shanghai in Mainland China under a STAR Market semiconductor-equipment scarcity premium. Because ACMR shares cannot be converted into ACM Shanghai A shares, the market cannot arbitrage the valuation gap in a clean way. The result is a persistent structural discount rather than a normal mispricing that can be eliminated by ordinary cross-market trading.
The activists’ logic is that Hong Kong can act as the bridge between those markets. Hong Kong provides access to global institutional investors, Mainland southbound investors through Stock Connect where applicable, sector specialists comfortable with China technology exposure, and investors accustomed to A/H valuation relationships. For ACM Shanghai, an H-share listing would create an offshore equity line in the operating company. For ACM Research, a fungible Hong Kong listing of the parent company would create an offshore equity line in the same legal security as Nasdaq-listed ACMR. The 2nd structure is more powerful because it would not rely on investors assigning value indirectly from an ACM Shanghai H-share price to ACMR; it would create direct price competition between the Nasdaq and Hong Kong markets for the same economic claim.
The most important distinction is fungibility. A conventional A+H structure for ACM Shanghai would likely create 2 non-fungible lines: Mainland A shares and Hong Kong H shares. That can improve price discovery, but it does not force convergence because A and H shares generally remain separate trading lines and Mainland capital controls can limit direct arbitrage. A fully fungible ACMR parent listing would be more direct. If the same Class A economic interest could move between Nasdaq and Hong Kong settlement systems, price gaps should be narrowed by brokers, arbitrageurs, and long-only capital reallocating between markets. That is the core reason Kerrisdale and Steamboat emphasize fungibility in the letter. HKEX’s overseas issuer regime is open to companies incorporated outside Hong Kong and Mainland China, but secondary listings can face liquidity risks if an active Hong Kong trading market does not develop; therefore, the quality of the fungibility, depositary, custody, and conversion mechanics would determine whether the strategy creates true arbitrage or merely another low-liquidity line. 
The proposed strategy also gives ACM a potential financing advantage. ACM is investing heavily in Lingang, Oregon, global customer support, R&D, mini-line capacity, and new product development. The company guided to approximately $200m of capex in 2026, compared with $58m in 2025, and is deliberately absorbing near-term operating margin pressure to pursue a broader product cycle. If ACMR can raise capital in Hong Kong at a valuation closer to ACM Shanghai’s A-share valuation or to a more normal H-share discount, the cost of equity could be lower than issuing Nasdaq shares at a structurally depressed parent valuation. However, an offering at the current ACMR valuation would still be dilutive unless proceeds are used for high-return growth investment, parent-level buybacks, or other value-accretive actions.
The strategy has a second-order governance rationale. ACMR’s discount reflects not only lack of investor access but also skepticism around the parent/subsidiary relationship. ACM’s 10-K states that ACM Research is not a Mainland China operating company, does not use a VIE, and directly owns ACM Shanghai, but it also states that ACM Research shareholders may never directly own equity interests in ACM Shanghai. The filing further notes that ACM Shanghai is controlled but not wholly owned by ACM Research, that ACM Shanghai has separate directors and officers with duties to ACM Shanghai stakeholders, that ACM Shanghai owns substantially all IP, and that future ACM Shanghai financings or equity compensation could dilute ACMR’s ownership. A Hong Kong listing does not eliminate these structural issues, but it can create a more transparent offshore valuation reference and potentially enable future transactions that more directly connect ACMR shareholders to ACM Shanghai value. 
VALUATION GAP ANALYSIS:
The valuation gap is large enough to justify activist attention. ACMR currently trades at approximately $53.99, with a market capitalization of approximately $3.69B and a P/E ratio of approximately 31.2x. ACM Shanghai trades at an approximately CNY75.05B market capitalization, or approximately $10.9B using a USD/CNY rate near 6.88. ACMR’s 73.7% ownership therefore implies a gross stake value of approximately $8.0B, before all frictions. A pure gross-stake comparison implies that ACMR trades at only approximately 46% of its ACM Shanghai stake value, or at an approximate 54% discount. That discount is directionally consistent with Kerrisdale’s separate public thesis that ACMR trades at a roughly 60% discount to its China-listed subsidiary, although exact values move with ACMR, ACMS, and FX. 
A discount is rational, but the current magnitude appears unusually wide. Legitimate discounts include non-controlling public shareholders at the ACM Research level, the fact that ACMR shareholders do not directly own ACM Shanghai stock, tax leakage on stake sales, Mainland capital controls, regulatory approvals required for transfers and listings, potential dilution from ACM Shanghai financings, limited dividend upstreaming, Entity List risk, dual-class voting control, and governance complexity. ACM’s 10-K states that Mainland China rules require annual appropriations of 10% of net after-tax profits to reserve funds before dividends and that subsidiary bank loans restrict dividend capacity; it also states that Class B common stock has 20 votes per share and that Class B holders collectively held 62.3% of voting power as of February 25, 2025. These are real reasons for a discount. The question is not whether ACMR should trade at parity to its ACM Shanghai stake; it is whether a 50%+ gross discount is excessive given the company’s direct ownership, majority control, substantial net cash, and ongoing ability to monetize ACM Shanghai shares. 
The A/H framework supports the activists’ argument but does not fully validate it. If ACM Shanghai’s H shares were to trade at a typical 10%-30% discount to A shares, the implied value of ACMR’s stake would still be far above ACMR’s current market capitalization. Using a CNY75.05B ACMS A-share market capitalization and a 73.7% stake, a 15.8% H-share discount would imply an ACMR stake value near $6.8B, still well above ACMR’s $3.69B market capitalization. A 30% H-share discount would imply stake value near $5.6B, still above the U.S. market cap. This illustrates why the letter has economic force. However, ACMR is not the same security as ACM Shanghai H shares, so a residual parent discount would remain unless ACMR either lists fungible parent shares in Hong Kong or executes additional corporate actions that more directly transfer or surface subsidiary value.
The ACM Shanghai stake sale in February 2026 is important evidence that the gap is monetizable, not purely theoretical. ACM sold approximately 4.8m ACM Shanghai shares at RMB160 per share, generating approximately $111m of gross proceeds and reducing ownership to 73.7%. That sale demonstrated that ACM can convert a portion of the subsidiary stake into cash at a valuation much closer to ACMS A-share trading levels than to ACMR’s U.S. valuation. However, the transaction was small, equal to approximately 1.3% of the ACM Shanghai stake, and does not prove that large-scale monetization can occur without regulatory friction, price pressure, tax leakage, or adverse signaling. 
