Chinese bubble-tea maker Chabaidao sinks 27% on Hong Kong debut as investors offload shares in biggest IPO of the year
- Chabaidao’s shares closed the day at HK$12.80 after slumping as much as 38 per cent in intraday trading
- China’s third-largest tea drinks chain raised about HK$2.6 billion (US$331.7 million) from the sale of 147.8 million shares at HK$17.50 each
Sichuan Baicha Baidao Industrial, which owns and operates a chain of bubble-tea shops in mainland China, tanked on its first day of trading in Hong Kong, as investors shunned the city’s biggest initial public offering (IPO) of the year amid shaky sentiment.
The shares slumped 27 per cent to close at HK$12.80 after falling by as much as 38 per cent in intraday trading. It was the worst first-day performance for any IPO in Hong Kong valued above US$300 million since June 2018, when Ganfeng Lithium Group plunged 29 per cent on debut, according to Bloomberg data. The Hang Seng Index added 1.9 per cent on Tuesday.
The sombre debut of Baicha Baidao, China’s third-largest maker of fresh tea drinks and also known as Chabaidao, underscores a challenging environment for Hong Kong’s IPO market, where the value of new offerings slumped by almost 30 per cent to US$604 million in the first quarter for the worst start since 2009.
The Hang Seng Index has been languishing this year after an unprecedented four years of losses up to 2023, with China’s dismal economic outlook and tensions between Beijing and Washington triggering an exodus of foreign investors.
“The tea drinks market is very competitive and it’s very difficult for the products to be different and unique,” said Dai Ming, a fund manager at Huichen Asset Management in Shanghai.
“Also the price of the stock is a bit high and investors are concerned because of the fragile market environment.”
The shares were valued at 21 times earnings for the past year versus a multiple of six times for the Hang Seng Index, data from Essence International and Bloomberg shows.