SICHUAN Baicha Baidao Industrial, also known as Chabaidao, plunged 10 per cent in its trading debut, indicating diminished demand for shares of companies making hugely popular bubble tea.
Shares traded as low as US$15.74 at early trade on Tuesday (Apr 23), after being sold at HK$17.50 apiece. The company, China’s third-largest maker of fresh tea drinks by sales value, raised about HK$2.59 billion (S$450 million) in Hong Kong’s biggest initial public offering (IPO) this year.
Chabaidao, meaning “100 varieties of tea”, is raising money at a sluggish time for new share sales in Hong Kong and as competition in the sector intensifies. Its shares declined more than 10 per cent in grey-market trading on Monday.
The share performance may influence decisions by tea chain operators such as Hunan Chayue Cultural Industry Development Group, known as Sexy Tea, and Mixue Group to tap the market.
Ten companies have had IPOs in Hong Kong that raised at least US$300 million over the past two years. They have dropped by an average of 2.6 per cent in their first session, data compiled by Bloomberg show.
Bubble tea, a sweet drink filled with sticky balls of tapioca, has been gaining popularity, creating at least a half-dozen billionaires in China in the past few years. Growing competition, however, threatens to take out some of the weaker players.
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Chabaidao founders opened the company’s first outlet in 2008 in Chengdu, the capital city of Sichuan province. A franchise model in 2018 turbocharged growth, taking the number of shops across China to more than 8,000. In January, Chabaidao opened an outlet in Seoul, its first outside China.
Chabaidao expects to use about half the proceeds from the IPO to improve operations and strengthen its supply chain, according to terms. China International Capital is the sole sponsor of the IPO. BLOOMBERG
