The bubble tea chain ChaPanda, led by Chinese billionaire Wang Xiaokun, is set to raise HK$2.6 billion ($330 million) in a Hong Kong IPO. This move will test investor enthusiasm, especially as its competitors prepare to go public amid fierce competition in the milk tea industry. The company plans to offer 147.8 million shares at HK$17.50 each and will use the proceeds to strengthen its supply chains and upgrade warehouses and stores. Public trading of the shares is expected to begin on April 23rd.
Wang Xiaokun, along with his wife Liu Weihong, founded ChaPanda in 2008 and has seen their net worth increase substantially over the years. The latest funding round completed in June last year valued Wang’s net worth at $1.4 billion, while Liu’s net worth reached $770 million. Despite this, analysts believe the entrepreneurs still have work to do to convince investors of ChaPanda’s future growth prospects. The company has expanded its network to over 8,000 stores across China using a franchise model and offers popular products like Taro Bubble Tea and Jasmine Milk Green Tea.
While ChaPanda has experienced impressive revenue growth, reaching 5.7 billion yuan ($788 million) last year, it has seen a slowdown compared to previous years. Analysts note that the Covid-19 pandemic and intense competition in the milk tea industry have impacted the chain’s growth rates. Competitors like Nayuki and Mixue Bingcheng also offer similar products, and some like Nayuki have seen a significant decrease in their share prices since going public. Other bubble tea chains like Chagee and Sexy Tea are also looking to go public, adding to the competition.
To counter these challenges and drive future revenue growth, ChaPanda aims to use the capital raised from its IPO to increase its number of stores. This move is seen as crucial in securing market share and improving revenue. Kenny Ng, a Hong Kong-based securities strategist, believes that early IPOs can help companies solidify their position in the market. However, he also notes that investor enthusiasm for the milk tea industry may have waned, suggesting that the industry may not be as attractive to investors as it once was.
Overall, ChaPanda’s IPO in Hong Kong will be closely watched as a test of investor sentiment towards the milk tea industry. With fierce competition, slowing growth rates, and other players preparing to go public, the company will need to showcase its ability to innovate and differentiate itself from its competitors to attract investors. As the public trading of ChaPanda’s shares begins on April 23rd, all eyes will be on the company’s performance and its ability to navigate the challenges ahead.
