Nayuki Shares Plunge Over 30% in Hong Kong IPO Debut

China's bubble tea industry faces challenges as leading chains Nayuki and ChaPanda see sharp declines in their Hong Kong IPOs, raising concerns about investor confidence and the profitability of consumer businesses in the country.

Trim Correspondents
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Nayuki Shares Plunge Over 30% in Hong Kong IPO Debut

Nayuki Shares Plunge Over 30% in Hong Kong IPO Debut

Nayuki, a leading Chinese bubble tea chain, experienced a sharp decline in its stock price during its initial public offering (IPO) on the Hong Kong Stock Exchange. The company's shares plunged more than 31% on their trading debut, underscoring the challenges the financial hub is facing in reviving investor confidence.

The bubble tea industry in China has seen the rise of several billionaires, with Sichuan Baicha Baidao Industrial, the country's third-largest bubble tea chain, recently raising HK$2.59 billion (S$450 million) in its Hong Kong IPO. However, growing competition from cheaper rivals, such as Guming Holdings and Auntea Jenny (Shanghai) Industrial, has put pressure on higher-end chains like Nayuki, whose shares have tumbled nearly 90% since its listing three years ago.

The market is not providing the same lofty valuations as before, and the profitability of consumer businesses remains uncertain due to the uneven revival of consumption in mainland China. The founders of Nayuki, Peng Xin and Zhao Lin, have seen their combined net worth drop from $2.2 billion in 2021 to less than $300 million today.

Why this matters: Nayuki's disappointing IPO performance highlights the challenges faced by consumer-focused businesses in China amid increased competition and uncertain economic recovery. The sharp decline in valuation also raises concerns about investor confidence in the Hong Kong stock market.

Sichuan Baicha Baidao, also known as ChaPanda, made a similarly disappointing debut on the Hong Kong market on Tuesday, with its shares opening 10% below the IPO price and dropping almost 40% in midday trading before closing at HK$12.80, down 27%. This poor performance casts a shadow on authorities' hopes for revitalizing initial public offering activity in the region.

As the bubble tea industry continues to evolve in China, with the country's largest bubble tea maker, Mixue Group, also considering an IPO, the market's response to Nayuki's and ChaPanda's listings serves as a cautionary tale for investors and companies alike. The path to profitability and sustained growth in this competitive landscape remains uncertain, and the appetite for high-end bubble tea chains may be waning in the face of more affordable alternatives.

Key Takeaways

  • Nayuki, a Chinese bubble tea chain, saw its stock price plunge 31% in its Hong Kong IPO.
  • China's bubble tea industry has created several billionaires, but faces growing competition from cheaper rivals.
  • Nayuki's founders' net worth dropped from $2.2B to under $300M since its listing 3 years ago.
  • Another bubble tea chain, ChaPanda, also had a disappointing Hong Kong IPO, casting doubts on the market.
  • The bubble tea industry's path to profitability remains uncertain as affordable alternatives challenge high-end chains.