Beijing halts bubble tea offshore IPO approvals over soured Hong Kong listings, sources say

By Julie Zhu, Scott Murdoch and Kane Wu

HONG KONG/SYDNEY (Reuters) – Offshore share offering plans of at least three Chinese bubble tea makers have been put on hold by the securities regulator due to the dour market performance of peers in Hong Kong amid weaker consumer sentiment at home, said eight sources.

Mixue Bingcheng, Guming Holdings and Auntea Jenny are among those whose offshore floating plans have been delayed by the China Securities Regulatory Commission (CSRC) this year, said the sources with knowledge of the matter.

Mixue, which has roughly 36,000 stores, was looking to raise up to $1 billion in its Hong Kong IPO, which would have been the largest new share sale in at least a year in the city, said five of the sources.

Guming, with 9,000 stores, aimed to raise up to $500 million via an Hong Kong listing, said two of them. But both Mixue and Guming IPO applications lapsed earlier this year after six months of waiting for the approval, said four of the sources.

As part of rules unveiled by the CSRC in March last year to strengthen oversight of offshore listings, Chinese companies looking to list in Hong Kong or New York must first get approval from their home regulator.

The regulatory move to put the bubble tea makers’ IPO plans on hold has been triggered by the nearly 27% Hong Kong debut-day slump in shares of Sichuan Baicha Baidao Industrial, the Chinese tea chain known as Chabaidao, said the sources.

Chabaidao, which raised $330 million in April, has since fallen 70% from its HK$17.5 per share IPO price.

In response to a Reuters request for comment, the CSRC said that it was advancing the filing work of the three tea beverage companies in accordance with regulations.

“Next, we will continue to optimize the filing mechanism for offshore listings, continuously improve the quality and efficiency of filing, and keep offshore financing channels open.”

All the sources declined to be named as they were not authorised to speak to the media.

Mixue declined to comment. Guming and Auntea Jenny did not respond to a request for comment.

The cautious stance of the regulator underscores the tighter scrutiny of the offshore IPO hopefuls in China, reducing the number of deals in Hong Kong or New York and stymieing Chinese companies’ aim to tap the capital market for fundraising.

Chinese companies have raised just $2.56 billion via IPOs in Hong Kong this year, versus $5.7 billion in the whole of last year, according to Dealogic data. The total haul this year is far below the $22.1 billion year-to-date record set in 2021.

REGULATORY CAUTION

The regulatory caution towards offshore share offerings by the bubble tea makers stems from low product differentiation and fierce competition in the sector at a time when consumers tighten their belts in a slowing economy.

Highlighting the tea sector’s weak performance, Chabaidao last month reported a 10% drop in gross revenue and 19% fall in gross profit in the first half of this year compared to a year-ago period.

Shares in Hong Kong-listed Nayuki, China’s only publicly traded bubble tea chain before Chabaidao, have dropped more than 90% since their debut in 2021, when it raised $330 million.

The bubble tea makers are not the only ones to take a hit from the heightened regulatory caution — Beijing has toughened rules for firms seeking funds offshore, and currently has more than 110 offshore listing hopefuls await its approvals.

Mixue and Guming, China’s largest and second-largest bubble tea chains by store count as of 2023, submitted applications for their IPOs in Hong Kong in January, Hong Kong Stock Exchange filings showed.

Both companies were planning to file again after updating financial information for the first half, two of the eight sources and another person with knowledge of the matter said. However, they have yet to do that.

In February, fruit tea chain Auntea Jenny filed for approval to raise up to $300 million via an Hong Kong IPO, according to two sources. Its application has also lapsed but the company plans to refile again, one of the sources said.