Bubble Tea Billionaire Wants To Raise $330 Million In Hong Kong IPO

ChaPanda, the bubble tea chain headed by Chinese billionaire Wang Xiaokun, aims to raise HK$2.6 billion ($330 million) in a Hong Kong IPO that will be a test of investor enthusiasm, especially as its rivals line up to go public amid intense competition in the milk tea industry.

The Chengdu, Sichuan-based company will offer 147.8 million shares for HK$17.50 apiece, according to a Monday filing with the Hong Kong Stock Exchange. It wants to use the proceeds to strengthen its supply chains and upgrading warehouses and stores, according to the filing. Public trading of the shares will start on April 23^rd.

The details come about eight months after ChaPanda filed a preliminary prospectus in Hong Kong last August. Chairman Wang, who opened the first ChaPanda store in Chengdu with his wife Liu Weihong in 2008, now has a net worth of $1.4 billion based on a company stake, according to Forbes estimates. Liu, who chairs a supervisory committee and is responsible for supervising the chain’s daily operations, has amassed a fortune of $770 million based on her own stake, Forbes estimates show.

Their net worths have increased from earlier, when a funding round completed last June gave 41-year-old Wang and his 43-year-old wife wealth of $1.1 billion and $700 million, respectively. But analysts say the entrepreneurs have a lot to do to convince investors of ChaPanda’s future prospects

Using a franchise model, the company has expanded its network of ChaPanda-branded stores to more than 8,000 across China, according to the latest stock exchange filing. Growth has come from offerings such as Taro Bubble Tea and Jasmine Milk Green Tea, which the stores sell for about $2 per cup. ChaPanda generates revenues by providing ingredients and equipment to the franchisees, and its sales grew 34.8% to 5.7 billion yuan ($788 million) last year. Profit attributable to shareholders was 1.14 billion yuan, up 20% from 2022.

Those growth rates, however, mark a slowdown from just a couple years ago, when ChaPanda’s top and bottom lines both expanded at a year-on-year rate of more than 200%, according to Wang Xinyao, an analyst who publishes via research platform Smartkarma. While the Covid-19 pandemic took its toll, the chain also faces cut-throat competition, says Kenny Ng, a Hong Kong-based securities strategist at Everbright Securities International.

The entry barrier to the milk tea industry is relatively low, and competitors from Hong Kong-listed Nayuki to bubble tea maker Mixue Bingcheng, which has filed for its own IPO in the Asian financial hub, offer similar products. Shares of Nayuki have plunged more than 80% since the company’s 2021 debut, but at least two other bubble tea chains, Chagee and Sexy Tea, want to go public as well.

Ng says ChaPanda wants capital to boost its number of stores, which is crucial to future revenue increases. “If companies can go public earlier, it will also help them solidify their market share in the market,” he says. “But overall, I believe that the time when investors were most enthusiastic about this industry has passed.”