Priyanka Tiwari
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In its debut trading day on the Hong Kong Stock Exchange, Mixue Group, the biggest bubble tea franchise in China, experienced a jump in its stock price. This came after Hong Kong investors were eager to purchase shares from the company’s IPO which raised around 3.45 billion Hong Kong dollars, which is equivalent to 444 million US dollars.
The stock increased by 47% relative to its trading price during the IPO which was set at HK$202.50 a share. There was such great demand that investors in Hong Kong attempted to use margin loans of over HK$1.8 trillion, setting a record for these types of loans. People with knowledge of the matter noted that the staggering number of applications resulted in lenders suspending the reception of orders a day earlier than expected.
Aside from serving as a warning sign for the IPO market in Hong Kong, whose value is expected to increase come this year, the demand the stock received will serve to keep other markets hopeful. The increase in this particular stock brought from non institutional investors earned Mixue, which is one of many companies actively trading in the bubble tea market, a wonderful opportunity: a market segment expected to reach $71 billion in the next three years.
“Whoever wins the mass market wins the world,” says Ben Harburg, founder of CoreValues Alpha. “Demand remains high for domestic Chinese fast moving consumer goods brands.”
This means that for Zhang Hongchao, the founder, and his younger brother Zhang Hongfu, their combined wealth as per the Bloomberg Billionaires Index is now 8.1 billion dollars. That is more than what Howard D. Schultz, the former chief executive officer of Starbucks Corp, is worth.
Originally established in 1997, Mixue started as a small business in Henan province in central China. Today, it is a globally recognized food and beverage franchise with over 45,300 stores selling bubble tea, coffee, and ice cream for just a dollar. This model has allowed Mixue to easily expand into lower-tier cities and towns in China. Mixue’s growth outpaces Starbucks and McDonald’s stores.
According to Jamie Zhou, deputy fund manager from M&G Investments, the company has been consistent in keeping prices low and resisted the urge to increase prices. This is why the company was able to give a mix of $60 million worth of shares.
“They remain focused on their core platform,” Zhou stated. According to him, Mixue’s agreement was the first IP0 for M&G in the Asia Pacific region, where it came on board as a cornerstone investor, which means the firm is restricted from selling the stock for at least six months.
Intense competition is also motivating the tea chain s to secure additional funds to continue their expansion and open new outlets, with Guming Holdings Ltd. and Sichuan Baicha Baidao Industrial Co. having listed on the Hong Kong stock exchange over the past year.
Mixue’s float is the largest on record so far, marking what is expected to be Hong Kong’s busiest year for IPOs since the year 2022. With mega deals such as CATL’s, which expects to garner in excess of $5 billion, going public is set to make double the $11 billion in 2025 according to Bloomberg Intelligence.
Trading debut appears few weeks after that of Guming that sells tea under the “Good me” brand and does business in China’s lower tier cities and towns. Since that stock’s debut trading mid February, it has appreciated by 16%.
Not all bubble tea establishments had such positive progress, however. Baicha Baidao, which entered the market in April under the Chabaidao brand, saw initial excitement for their products quickly subside, similarly to Nayuki Holdings Ltd., as both brands now trade under their IPO price due to high competition in the market.
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