(Bloomberg) -- China’s bubble-tea makers are reviving plans for initial public offerings, encouraged by signs that Beijing is loosening its grip on the market and sentiment is improving after a disappointing debut by one of the industry’s biggest chains earlier this year.
The China Securities Regulatory Commission’s recent approval of a Hong Kong IPO by Guming Holdings, almost a year after the tea maker first submitted pre-listing documents, has helped bring matters to a boil. Now, other industry players will be vying to get the green light to list offshore, people familiar with the developments said.
Many IPO plans hit the skids after China issued guidelines discouraging share sales from some sectors and advised that companies reliant on fast-expanding franchise models, as many tea chains are, couldn’t list locally.
Then came the Hong Kong IPO of Sichuan Baicha Baidao Industrial Co., a tea maker better known as Chabaidao. Its shares tumbled 27% on the first day of trading in April, and another 9.4% the next. The slump has eased, but Chabaidao is still down 38% since the listing, which at that point was Hong Kong’s biggest of the year.
Others including China’s biggest bubble-tea chain Mixue Group and Auntea Jenny saw their Hong Kong IPO applications lapse after CSRC approvals didn’t materialize.
There are early indications that the regulator may be shifting its approach to companies in sectors that it had been discouraging from listing, according to the people, who asked not to be identified discussing private information.
The CSRC didn’t respond to a request seeking comment.
“No one has the crystal ball for the regulatory approval process, but it seems to be a positive sign for the bubble-tea chain stores,” Christine Xu, a partner at law firm Linklaters LLP who leads Chinese equity capital markets transactions, said of Guming’s approval to list.
A revival would also be a boost for Hong Kong and its professional services industry, given recent weakness in the IPO market. About $10.5 billion has been raised through first-time share sales in the city this year, an increase from 2023 but still much quieter than previously, data compiled by Bloomberg show.
Some Chinese tea companies are looking further afield to the US, where there’s more liquidity and the listing process is generally faster, albeit they still need CSRC approval. Hunan Chayue Cultural Industry Development Group Ltd., known as Sexy Tea, is now considering an IPO there instead of Hong Kong, Bloomberg News reported last week.
Potential progress in the realm of bubble tea could signal a wider pickup for the consumer sector as China tries to get its economy humming again.
“We’re seeing the CSRC approvals coming through,” said Jean Thio, a partner in Clifford Chance’s capital markets group. “We’ll see good quality companies come to list.”
--With assistance from Pei Li and Zhang Dingmin.
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