China's Cnano to Sell Controlling Stake in US Unit for USD25.5 Million to Comply With One ...

Cnano Technology, a prominent Chinese supplier of carbon nanotube materials, has announced the sale of a controlling stake in its US subsidiary to Aether Materials for USD25.5 million. This move is intended to comply with the One Big Beautiful Bill Act, ensuring the continued operation of its North American business.

The transaction involves Cnano selling a 51 percent stake in C-Nano Technology in phases. This strategic decision aims to align Cnano Technology USA with the non-prohibited foreign entities criteria under the One Big Beautiful Bill Act. Specifically, it ensures that no single Chinese entity holds more than 25 percent of Cnano USA, and that multiple Chinese entities do not collectively hold more than 40 percent.

In the initial phase, Cnano will transfer 51 percent of its equity in C-Nano to Aether. Consequently, C-Nano will no longer be part of Cnano's consolidated financial report post-transaction. Aether is controlled by Zheng Tao, a significant shareholder and controller of Cnano's parent company.

The One Big Beautiful Bill Act, enacted in July last year, refines the criteria for identifying Non-PFEs under the US Inflation Reduction Act. Under these rules, North American customers purchasing products from firms classified as PFEs are ineligible for advanced manufacturing tax credits, potentially weakening the market competitiveness of such firms.

Cnano USA was classified as a PFE due to Cnano's indirect 100 percent equity holding through C-Nano. Without this adjustment, Cnano risks losing key customers in North America, facing idle production capacity, and incurring losses. Additionally, high operational costs at Cnano USA’s production facility make it commercially unfeasible to supply products to other markets.

Exporting products manufactured in China directly to North America would incur high import tariffs. Domestic entities classified as PFEs mean that North American customers buying these products would still be ineligible for tax credits, diminishing market competitiveness.

Despite these challenges, Cnano reported a 15 percent increase in net profit to CNY135 million (USD20.1 million) in the first half of this year, with revenue rising 11 percent to CNY728 million (USD110 million). Cnano specializes in the R&D, production, and sales of nanotube carbon materials, including carbon nanotube powder and graphene composite conductive paste.

Shares of Cnano [SHA: 688116] rose 2 percent to CNY32.30 (USD4.81) today, while the broader Shanghai stock market increased by 0.2 percent.