Nayuki Holdings Ltd., a Shenzhen-based bubble tea chain, completed its Hong Kong initial public offering on July 2, 2021, raising $656 million. The company sold 257.3 million shares at HK$19.8 each, the top of its marketed range of HK$17.2 to HK$19.8, according to Bloomberg News.
The retail portion of the offering saw oversubscription exceeding 400 times, based on information from unnamed sources cited by Bloomberg. Founders Peng Xin and Zhao Lin, who established the chain in 2014, now hold stakes valued at a minimum of $1.1 billion. Five cornerstone investors committed approximately $155 million in shares, including UBS Asset Management, China Universal Asset Management, China GF Fund, China Southern Asset Management, and CCB International, as stated in the prospectus.
Market Context and Investor Selectivity
The strong demand for Nayuki’s IPO occurred after a sluggish period for Hong Kong listings. Data compiled by Bloomberg showed 13 companies listed in April and four in May, following a slow start to the year.
However, signs of recovery emerged. Angel Technology Co., a transparent orthodontic braces manufacturer, surged 132% on its June 16 debut, becoming one of the year’s most popular offerings. Yet, not all listings succeeded.
China Youran Dairy Group Ltd. and CARsgen Therapeutics Holdings Ltd. both fell on their commercial debut the previous Friday, rising only 12% and 9%, respectively. Investors have grown more selective amid increased market volatility and expectations of tighter monetary policy from China.
An analyst familiar with the deal, speaking anonymously, noted that the global technology stocks sell-off created a more favorable situation for Nayuki’s debut, as its consumer-focused offering became more attractive to investors.
Company Finances and Expansion Plans
Nayuki reported a net loss of 203 million yuan in 2020, widening from a loss of 40 million yuan the previous year. Sales rose 22% to 3.1 billion yuan. The company sells fresh fruit teas, cold drinks, and baked goods, including its signature cheese-foam-topped beverages.
At the end of 2020, Nayuki operated 491 flagship stores: 489 in mainland China, one in Hong Kong, and one in Japan. Proceeds from the offering will fund expansion of its teahouse network, increase market penetration, and strengthen its supply chain.
“We intend to open more stores in existing and new cities,” the company stated in its prospectus. The 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 but eventually chose Hong Kong. The shift reflected broader trends among Chinese companies facing increased scrutiny from US regulators and tighter Chinese government oversight on overseas listings. Listing in Hong Kong provided access to Asian investors familiar with the bubble tea market and avoided potential delisting risks in the US.
The IPO priced at the top of the range, valuing the company at approximately $4.38 billion, more than double its $2 billion valuation in its latest private financing round.
Competitive Landscape and Risks
Nayuki faces stiff competition from other Chinese tea chains, including market leader Heytea. The bubble tea market in China is highly fragmented, with hundreds of local brands. The company’s 2020 losses reflected heavy spending on store openings and marketing, while 22% sales growth indicated strong demand despite the pandemic.
A Hong Kong-based analyst tracking consumer stocks noted that the Chinese bubble tea market is growing but competition is fierce, and Nayuki must demonstrate an ability to turn a profit while expanding. The company’s reliance on fresh ingredients and in-store preparation creates operational challenges, as supply chain disruptions or quality issues could harm the brand.
The IPO’s success signals renewed investor appetite for Hong Kong listings, but mixed performance of recent debuts suggests caution. Nayuki’s ability to execute its expansion plan while achieving profitability will determine whether its stock can sustain its strong opening.
