Tea drinks Mixue shares pop nearly 30% in Hong Kong trading debut

Shares of China’s largest bubble tea and drinks chain Mixue Group jumped nearly 30% on their first day of trading on the Hong Kong Stock Exchange on Monday after the firm raised $444 million in an initial public offering.Mixue sold 17 million shares in the deal at a fixed price of HK$202.50 ($26.04) each.The shares started trading at HK$262 each and the gains outpaced a 0.8% rise in Hong Kong’s Hang Seng Index.Retail investors subscribed for 5,258 times more shares than were on offer in that tranche, according to Mixue’s filings, making it one of Hong Kong’s most popular ever IPOs.The retail subscription rate was just below Bloks Group, whose retail book was 6,000 times oversubscribed, a record, in its January IPO.The institutional tranche of the deal was 35 times covered, the filings showed.Media reported Hong Kong retail investors applied for a record HK$1.8 trillion worth of margin loans to buy Mixue stock during the book-building process.The debut is a positive start for Mixue compared to its rival Guming whose shares slumped 10% on their first trading day in Hong Kong on Feb.12.Mixue is often seen as China’s largest chain of iced drinks, milk tea, and ice cream.

However, it operates more like a raw-material supplier than a traditional beverage brand.Founded in 1997 as a small ice shop in Zhengzhou, Mixue has grown into a franchise giant with over 45,000 stores globally by last September, surpassing Starbucks’ 40,576 stores worldwide.Unlike Starbucks, which operates 53% of its stores directly, Mixue relies heavily on franchising, with more than 99% of its stores run by franchisees.This model has proven highly profitable.In the first nine months of 2024, Mixue reported a net profit of 3.49 billion yuan, up from 3.19 billion yuan in the same period of the previous year, according to its IPO filings.This comes from selling drinks priced at an average of just 6 yuan ($0.8234) per cup.The secret lies in its franchise model, which generates revenue by s...