AXT, Inc. (AXTI), a maker of indium phosphide substrates that connect data centers, is attributing the sudden spike in value of a key joint venture to an unnamed investor who made an unsolicited offer at a significant premium just months after AXT slashed the fair value of its stake in the Chinese JV.

In June 2025, AXT impaired the value of its ten-percent stake in Emeishan Jia Mei High Purity Metals Co., Ltd. (Jia Meii) by $145,000 after two new investors took a stake in the JV at a lower valuation and diluted AXT’s stake to 7.14%.

The impairment slashed the fair value of AXT’s stake in Jia Mei by 26.3%.

In September 2025— just three months after the impairment— AXT inserted new language in the latest quarterly filing indicating an unnamed investor had suddenly made an unsolicited offer at a significant premium for AXT’s stake in Jia Mei which resulted in AXT boking.

“... a gain of $296,000, reflecting an increase in the estimated fair value of the investment based on an offer from an unrelated buyer to purchase our shares.”

The alleged offer inflated AXT’s carrying value of Jia Meii by 72.9%.

It also came just in time to mask significant deterioration in AXT’’s latest financial results.

Despite significant improvement in gross margin, AXT’s operating loss accelerated from ($8.6 million) to ($18.1 million) in the nine months ended September 30, 2025.

The JV mark-up slashed AXT’s net loss in the quarter by 15%.

The stock is up more than 270% in the last three months.

In November 2025, AXT filed to sell stock and other securities worth as much as $100 million, or nearly 20% of the company’s current market value.

With an Enterprise Value (EV) of nearly $624 million, AXT is priced as if it will grow annual sales to more than $1.99 billion, up from an estimated $94.08 million in FY25. To justify its current share price of $11.48 our Reverse DCF— which quantifies investor expectations embedded in the current share price— indicates AXT must:

—Grow sales 35% annually for the next decade, versus the company’s estimated FY25 sales growth of (5.3%) and FY23 and FY24 sales growth of (46.4%) and 31.2%, respectively
—Increase NOPAT margin to 15%, versus our FY23 and FY24 estimates of (26.6%) and (14.4%), respectively
—Increase Invested Capital (IC) Turns to 0.75, up from our three-year average estimate of 0.28

Notably, the current share price also implies AXT increases Return on Invested Capital (ROIC) to 12% versus our FY23 and FY24 estimates of (5.4%) and (3.9%), respectively: