On March 3, 2025, Mixue Group, the largest bubble tea and beverage chain in China, made waves on the Hong Kong Stock Exchange with its initial public offering (IPO) witnessing stocks surge nearly 43% on its first trading day. The IPO, which raised 3.45 billion HKD (approximately 444 million USD), sold 17 million shares at the set price of 202.5 HKD each. By the end of the trading day, shares reached as high as 298 HKD, showcasing overwhelming interest from investors. This event marks one of the most successful IPO launches on the Hong Kong market, spurring hopes for a revitalized IPO environment amid economic recovery efforts by the Chinese government.
The IPO drew extraordinary attention, with retail investors registering for more than 1.8 trillion HKD, leading to the early closure of subscriptions to manage the influx. The massive interest indicates not only the popularity of Mixue but also suggests revitalization within the broader Hong Kong market, signaling potential growth for upcoming IPOs. According to reports, this rapid increase was bolstered by the expansion of the bubble tea market, projected to hit 71 billion USD over the next three years.
"Anyone who conquers the mass market will win the world," stated Ben Harburg, founder of CoreValues Alpha, indicating the competitive nature of consumer brands within China. His observations reflect the prevailing sentiment among industry experts, who view Mixue's extensive potential for growth as emblematic of the renewed investor enthusiasm.
Mixue was founded in 1997 as a small ice cream shop in Zhengzhou, Henan Province, and has rapidly expanded to encompass over 45,000 stores globally, surpassing Starbucks' 40,576 locations as of September 2024. The success of Mixue is attributed to its effective franchise model and affordable pricing strategy, with its drinks selling for as low as 6 Chinese Yuan (approximately 0.82 USD), appealing greatly to budget-conscious consumers across varying cities.
George Au, deputy sales director of Phillip Securities, noted, "Many Chinese tea chain stocks had lackluster debuts, so Mixue’s over 30% rise is genuinely surprising to investors." This sentiment was echoed across financial circles, reiteratively pointing to the enthusiasm surrounding Mixue; investors even brought families to open accounts just to participate.
According to Mixue's securities filing, retail investors acquired shares more than 5,258 times the available offering, making it one of the most popular IPOs Hong Kong has seen. Institutional investors offered 35 times their request amount, reflecting high demand for the company’s shares.
The Hong Kong IPO market has begun the year strongly, with 1.44 billion USD worth of IPOs to date, the best start since 2021, propelled by declining registration fees and enhanced access for retail investors. Dickie Wong, managing director of Kingston Securities, remarked, "The registration costs for retail investors have dropped to nearly zero, which enhances their motivation to participate."
Mixue’s business model stands out, primarily operating as both a beverage firm and raw materials supplier for its franchises. Unlike traditional beverage companies, the majority of Mixue’s stores are independently operated by franchisees, enabling the brand to lower operational overhead and maintain high profitability. For the first nine months of 2024, the company recorded a net profit of 3.49 billion Yuan, up from 3.19 billion Yuan from the previous year.
Experts suggest the company may soon expand more rapidly overseas, eyeing markets such as Europe and the United States, akin to its competitor Heytea. Longdley Zephirin, chief analyst at The Zephirin Group, expressed growing excitement among investors for tea brands, particularly following Mixue’s IPO success.
Currently dominating Southeast Asian markets, Mixue's future growth will depend on how effectively it navigates entry and competition within first-tier cities where established brands such as Nayuki and Heytea already thrive.
If the initial reception is any indicator, the bubble tea market is gearing up for perhaps one of the most dynamic years it has seen since becoming hugely popular. With other major players like CATL also planning to launch significant IPOs, experts predict the overall capital raised from IPOs to double this year to exceed 22 billion USD. The potential profitability and trendsetting nature of brands like Mixue must be monitored closely as investors and market analysts watch this developing story.
Despite challenges, the successful launch of Mixue could mark the beginning of renewed interest and investment opportunities within the broader IPO sphere, as investors seek the next big opportunity. With almost thrilling momentum, the potential for sustained growth adds to the attractiveness of Mixue’s business strategy. The vibrancy surrounding their IPO encapsulates the hopes of many, making it clear: savvy investors will remain attentive to the tea-infused narrative centered around Mixue’s ascension.