In a remarkable turn of events, CATL (Contemporary Amperex Technology Co., Limited) has eclipsed a significant milestone in the stock market by becoming the first technology company in China's A-share market to achieve a market capitalization exceeding 1 trillion yuanThis meteoric rise is notable, particularly given that just a couple of years prior, in October 2019, the stock was valued at approximately 70 yuan per shareFast forward to June 4, 2021, and the stock reached an unprecedented high of 439 yuan, showcasing an increase of over 500%. This unprecedented achievement is considered an extraordinary signal for the A-share market, igniting discussions among investors and analysts alike about the potential implications for the future.

However, the burst of enthusiasm surrounding CATL's soaring stock price was swiftly overshadowed by a sudden downturn on the very day it achieved its historical peak

The stock experienced a sharp drop of 5.7%, and at one point during the trading session, it even fell by more than 7%. Investors and market watchers began to ponder the reasons behind this unexpected plunge, especially in light of the company's recent accomplishments.

The fundamental cause behind this decline was the onset of a share lockup expirationCATL first went public on June 11, 2018, and as the three-year anniversary approached, significant numbers of shares became eligible for tradingSpecifically, on June 11, 2021, a staggering 952 million shares were released from lockup, translating to an enormous potential market value of approximately 390 billion yuan based on the stock price at the timeThis release marked one of the largest share unlockings in the A-share market for the year, leading to a natural rebalancing of supply and demand dynamics.

To put the scale of this event into perspective, the unlock event constituted approximately 40.88% of CATL's total outstanding shares, thereby achieving a near-total float of shares which rose to about 99.14%. The remaining withheld shares were primarily related to equity incentives, further illustrating just how much stock was made available for public trading

• ECB to Cut Rates Next Month
• Insurance Funds Boost Bank Stock Holdings
• Dollar Strengthens
• Robust Euro-American Currency Market
• 100 Years of Insurance Asset Management Innovation

This expansion of freely tradable shares can create significant volatility, as the market adjusts to the new supply.

It is essential to note that while stock prices fluctuate based on supply and demand, the true market value of shares is often not accurately reflected until full liquidity is achievedFollowing an initial public offering (IPO), stocks typically experience substantial price increases, largely because the percentage of shares available for trading is minimal—often not exceeding 25%, and in some cases, it can be as low as 10%. This scarcity encourages speculative trading and can lead to inflated pricesHowever, as the lockup periods come to an end, the influx of shares can result in a significant price correction process.

CATL stands as a leading player in the burgeoning field of new energy power systems and is recognized as the largest lithium battery manufacturer globally

Its prominence in the electric vehicle (EV) sector marks it as one of the most promising industries of the futureDespite CATL's strong financial performance, the robustness of its stock price remains a critical point of reflection, particularly as it withstands upcoming challenges from the release of 400 billion yuan worth of unlocked shares.

The concept of liquidity and the broad release of shares is a stringent test that every publicly traded company must face, and CATL is no exceptionThe company has been on an impressive growth trajectory; the year 2021 is expected to continue the trend of substantial revenue growthMany production lines established in previous years have now come online, enabling the company to capitalize on market demand effectivelyFor businesses with guaranteed sales, expanded production capacity directly translates into increased revenue and wealth.