Six different Chinese bubble tea cafe companies are planning to go public in Hong Kong and the US in order to avoid China’s domestic regulators, which are reluctant to allow such businesses to set foot on the stock markets, writes “Bloomberg”.
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At least six companies that sell the popular drink are considering initial public offerings (IPOs) in foreign markets, Bloomberg reports, citing sources. Companies range in size from Mixue Bingcheng, China’s largest bubble tea chain with 28,000 stores, to Zhejiang XSQ Tea at the smaller end with 1,600 stores.
The media explains that Chinese regulators issued guidelines earlier this year recommending against listing certain types of companies on the stock market. Among them are training start-ups and alcohol retailers. According to the investment bank “Chanson & Co.” Food and beverage chains are also among the companies barred from listing on China’s main bourses, said spokesman Shen Meng, “especially for projects that burn cash to scale up.”
“Unfortunately, almost all bubble tea makers are adopting this business model,” Meng added, explaining that they are in the red at the start-up stage of the business, making it difficult to meet Chinese regulators’ IPO standards for the stock market.
Instead of pursuing an IPO in China, bankers are rushing to offer bubble tea companies overseas. The story of why to invest is being linked to the expectation that the Chinese will spend the money they saved during the pandemic. It is true that this has not come true at the moment and, as both “Bloomberg” and “The Financial Times” write, the economy of Asia’s largest country is recovering slowly.
For example, the company Nayuki Holdings, which also offered bubble tea, launched in Hong Kong two years ago, but now its shares have lost 70% of the price that was asked in the original offer.
“Chinese food and beverage chains typically rely on rapid expansion to capture a large market share and introduce investors to this as an exit strategy for sales,” commented Gary Ng, senior economist at Natixis in Hong Kong. “It also means that the corporate health of these companies may not be stable, and the chains are usually very easy to replace if there are new, good competitors.”
It should be mentioned that none of the companies have yet publicly spoken about their plans, and potentially they could still change their minds.
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2023-07-24 11:04:39
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