Shares of Guming, a popular Chinese bubble tea brand, experienced a rough start on their Hong Kong debut, falling as much as 10% from their offering price. Despite strong retail demand for its IPO, the company’s stock ended the first day of trading at HK$9.30, marking a 6.4% decrease from the HK$9.94 offer price.
The milk tea maker had priced its 182.4 million shares at the top of the indicated range, but retail investors, many of whom had eagerly subscribed to the IPO, quickly sold off their shares after the stock opened at HK$10. While Guming’s listing had been oversubscribed by nearly 200 times, the stock’s poor performance raised concerns about the future prospects of similar IPOs in the bubble tea sector.
Guming operates over 9,000 stores across China, and its brand is widely recognized in the market. However, the lukewarm debut highlights the challenges faced by bubble tea companies in Hong Kong’s volatile stock market, especially given the recent struggles of other firms in the sector, such as Sichuan Baicha Baidao, which saw its stock price drop by 44% since its listing.
As Guming’s debut underperformed, eyes are now on its competitor, Mixue, which is expected to raise around US$500 million in an upcoming IPO. If Guming’s weak performance is any indication, Mixue may face a tough road ahead in securing investor interest.
Analysts suggest that the market’s tepid reception of Guming’s listing could be attributed to a combination of factors, including the oversubscription of the retail tranche, which prompted a clawback mechanism, and the general cooling of IPOs in the sector after regulatory concerns arose last year over bubble tea companies.
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