Mixue Group, operator of the Chinese mainland’s largest bubble-tea chain, plans to raise HK$3.45 billion ($444 million) in a Hong Kong initial public offering to help it fend off competition in the fast-growing market for the freshly made drinks.
The company is selling 17.06 million shares at HK$202.50 apiece, with an option to increase the number of shares depending on demand, it said in a statement Friday. Trading is scheduled to begin March 3.
The proceeds will help Mixue, whose franchise has more stores than Starbucks Corp globally, open even more tea shops and lean on its scale to stay ahead of the competition. The mainland’s bubble-tea market is forecast to surge to $71 billion in three years from $9.6 billion in 2018, though it’s highly competitive with vendors regularly engaging in price wars.
ALSO READ: Chinese bubble tea maker clears Hong Kong Stock Exchange listing hearing
“Mixue is better positioned than other tea-chain operators such as Nayuki and Guming, due to the former’s well-established, sizable supply chain and its positioning as budget drinks, Bloomberg Intelligence analyst Angela HanLee said.
Investors have put in enough orders to buy all of the shares being offered, according to people familiar with the matter. Hillhouse Investment, HongShan Capital Group — formerly Sequoia China — and Meituan’s Long-Z investment arm are among the offering’s cornerstone investors, who will hold the shares for at least six months, according to Mixue’s listing document.
Bank of America Corp, Goldman Sachs Group Inc and UBS Group AG are leading the effort to arrange the sale.
READ MORE: Hang Seng Tech Index soars over 4% in morning trading
Mixue follows smaller rivals such as Guming Holdings Ltd and Sichuan Baicha Baidao Industrial Co to come to market in the past year. Despite the initial hype over their shares, bubble-tea makers have seen their shares fizzle amid fierce competition in the industry.
The company, which has more than 45,000 stores globally, saw revenue rise 21 percent to 18.7 billion yuan ($2.6 billion) in the first nine months of 2024, with profit surging 42 percent. Its core drinks range from 2 yuan to 8 yuan, making them cheaper than those of major local brands, according to Mixue’s prospectus.
