Bubble tea chain Nayuki Holdings Ltd. raised US$656 million in its Hong Kong initial public offering on July 2, 2021, pricing shares at the top of its marketed range. The Shenzhen-based company sold 257.3 million shares at HK$19.8 each, according to Bloomberg News. Founders Peng Xin and Zhao Lin, who launched the chain in 2014, now hold stakes worth at least US$1.1 billion.
Pricing and investor demand
Nayuki priced its IPO at HK$19.8 per share, the high end of the HK$17.2 to HK$19.8 range. The retail portion of the offering attracted more than 400 times oversubscription, according to unnamed sources cited by Bloomberg. Five major investors agreed to subscribe for approximately US$155 million in shares. Those investors included UBS Asset Management, China Universal Asset Management, China GF Fund, China Southern Asset Management, and CCB International, the prospectus showed.
The strong demand came after a period of downturn for Hong Kong IPOs. At least 13 companies had listed in April and four in May, according to data compiled by Bloomberg. The market had been slow earlier in the year.
Market context and investor selectivity
The IPO market in Hong Kong showed signs of recovery. Angel Technology Co., a transparent orthodontic braces manufacturer, surged 132% when it debuted on June 16. That made it one of the year’s most popular offerings in the city.
But not all listings have fared well. Investors have become more selective amid increased market volatility and expectations of tighter monetary policy from China. China Youran Dairy Group Ltd. and CARsgen Therapeutics Holdings Ltd. both fell on their commercial debut last Friday, rising only 12% and 9% respectively.
“The global technology stocks sell-off has created a more favorable situation for the debut,” said one analyst familiar with the deal, speaking on condition of anonymity. The decline in tech stocks made Nayuki’s consumer-focused offering more attractive to investors.
Company finances and expansion plans
Nayuki reported a net loss of 203 million yuan in 2020, compared with a loss of 40 million yuan the previous year. Sales increased 22% to 3.1 billion yuan. The company sells fresh fruit teas, cold drinks, and baked goods, including its popular cheese-foam-topped drinks.
The company plans to use proceeds from the offering to expand its teahouse network, increase market penetration, and strengthen its supply chain. At the end of 2020, Nayuki operated 491 flagship stores. That included 489 in mainland China, one in Hong Kong, and one in Japan.
“We intend to open more stores in existing and new cities,” the company said in its prospectus. The expansion strategy targets both first-tier cities and lower-tier markets where competition from local tea shops is intense.
Shift from US to Hong Kong listing
Nayuki originally planned to list in the United States in February 2020. The company eventually settled on Hong Kong. The shift reflected broader trends among Chinese companies facing increased scrutiny from US regulators. The Chinese government’s tightening of oversight on overseas listings also played a role.
The decision to list in Hong Kong gave Nayuki access to Asian investors familiar with the bubble tea market. It also avoided potential delisting risks in the US. The IPO priced at the top of the range, valuing the company at approximately US$4.38 billion. That was more than double its valuation of US$2 billion in its latest private financing round.
Competitive landscape and risks
Nayuki faces stiff competition from other Chinese tea chains, including market leader Heytea. Both companies have expanded rapidly in recent years. The bubble tea market in China is highly fragmented with hundreds of local brands.
The company’s losses in 2020 reflected heavy spending on store openings and marketing. Sales growth of 22% showed demand remained strong despite the pandemic. But profitability remains a concern for investors.
“The Chinese bubble tea market is growing but competition is fierce,” said a Hong Kong-based analyst who tracks consumer stocks. “Nayuki needs to show it can turn a profit while expanding.”
The company’s reliance on fresh ingredients and in-store preparation also creates operational challenges. Supply chain disruptions or quality issues could hurt the brand.
The IPO’s success signals renewed investor appetite for Hong Kong listings. But the mixed performance of recent debuts suggests caution remains. Nayuki’s ability to execute its expansion plan while achieving profitability will determine whether its stock can sustain the strong opening.
