Sichuan Baicha Baidao, commonly known as Chabaidao or ChaPanda, encountered a lackluster market debut on Tuesday as its shares failed to meet expectations, plummeting by as much as 38% from their listing price.
The company, a prominent player in China’s bubble tea landscape and the third-largest retailer of freshly made tea drinks in the country, had set its IPO shares at $17.50 Hong Kong dollars ($2.23) each. However, they experienced a significant decline, dropping to as low as $10.80 Hong Kong dollars ($1.38) within the initial two hours of trading on the Hong Kong stock exchange. By the end of the trading day, ChaPanda’s shares closed nearly 27% lower at $12.80 Hong Kong dollars ($1.63).
In its IPO prospectus, ChaPanda highlighted its extensive network of over 8,000 stores, primarily operated through franchises, since its inception in 2008 with its first store in Chengdu, Sichuan. The company aimed to utilize the funds raised from the IPO to enhance its supply chain and digitalize its operations, among other strategic initiatives.
The disappointing performance of ChaPanda’s shares raises concerns amid a challenging period for Chinese stocks. The bubble tea industry, a cultural phenomenon with millions of followers globally, has seen remarkable growth in China, reaching an estimated worth of 145 billion yuan ($20 billion) in 2023, according to the China Chain Store & Franchise Association.
ChaPanda’s underwhelming market debut may serve as a cautionary tale for other bubble tea companies eyeing IPOs. Notably, two prominent bubble tea brands, Mixue Group and Guming Holdings, applied for IPOs on the Hong Kong stock exchange earlier this year, reflecting ongoing interest in the sector.
The subdued performance of ChaPanda’s shares is emblematic of broader challenges facing the Chinese stock market. Economic uncertainties, including a real estate crisis and high youth unemployment, have contributed to investor apprehension. While efforts have been made by Chinese officials to boost investor confidence, the market remains volatile.
The sluggish IPO market in Hong Kong during the first quarter of this year, as noted by Robert Lui, a capital markets analyst at Deloitte, underscores the prevailing challenges in the region’s stock market, characterized by low turnover and valuation, which hinge on market liquidity.
