China's Bubble Tea Chain Mixue Group's IPO Attracted Huge Interest from Retail Investors

Scott Peters
03 Mar, 2025
New York City

Investors in Hong Kong bid up stock price of the rapidly expanding beverage chain across Asia. 

Mixue Group, China’s largest fresh-drink company, raised HK$3.45 billion ($444 million) in a Hong Kong initial public offering, aiming to expand its business amid heightened competition.

The company’s stock jumped in its Hong Kong trading debut on March 3, marking it the city’s most ever popular initial public offering.

Shares of the Zhengzhou-based company changed hands at HK$262 each when trading began in Hong Kong, 29.3% higher than the offer price of HK$202.50.

The opening price valued the company’s Hong Kong-listed equity base at HK$99 billion or $12.7 billion.

 

Offering Details

Mixue sold 17.1 million shares at HK$202.50 each, and the company's public offering's retail tranche was  oversubscribed by 6,000 times. 

Bank of America Securities, Goldman Sachs, and UBS are the joint sponsors of Mixue’s public offering.

The company plans to use the proceeds for production facilities, enhancing its brand and marketing, working capital, and general corporate purposes.

The offering attracted five cornerstone investors, who agreed to buy $200 million worth of the shares. 

They were British asset manager M&G Investments, HongShan Capital’s growth fund, a unit of Boyu Capital, a Hillhouse Group fund, and Meituan’s Long-Z Fund.

Mixue began its book-building process on February 21, with a minimum investment requirement of HK$20,454.22 for a lot of 100 shares.

A base case valuation for Mixue suggested a market capitalization of HK$96 billion or a target price of HK$254, which was 26% higher than the IPO price.

Mixue’s subscription level is comparable to that of Chinese toymaker Bloks Group, which completed its HK$1.6 billion IPO last month, with retail investors subscribing for 6,000 times the shares that were allocated to them.

Hong Kong has successfully attracted several high profile companies to list their shares,  and raise billions of dollars from investors.  

The share offering follows peers Guming Holdings Ltd.’s HK$1.81 billion listing earlier in February and Sichuan Baicha Baidao Industrial Co. Ltd.’s HK$2.6 billion IPO in April 2024.

 

Company History

For the nine months ended in September, Mixue said revenue increased 21.2% to 18.66 billion yuan from 15.39 billion yuan, and profit rose 45.2% to 3.49 billion yuan from 2.45 billion yuan a year ago.

The company served up around 7.1 billion drinks in the period.

Founder and chairman Zhang Hongchao began the business in 1997 in Zhengzhou, the capital of the inland province Henan, with a homemade shaved ice machine.

In 2018, the firm launched Snow King as its company logo and brand ambassador.

Today, Mixue has 45,302 stores in 300 cities and 4,900 towns  in mainland China and 11 overseas markets in Southeast Asia, Australia, Japan, and South Korea. 

The beverage chain is well-known for its affordable prices of freshly made fruit and tea drinks, ice cream, and coffee, selling for about $1.

The company may have reached the growth ceiling in the China market based on its current expansion speed, analysts said.

In 2023, Mixue created or supported approximately 785,000 job opportunities, with 68% of store employees being female.

Mixue’s individual store performance experienced fluctuations in 2022, primarily due to the disruptions caused by the COVID-19 pandemic. 

But while the company continued to scale its store network, the individual store performance has largely recovered post-pandemic since 2023.

The company’s agricultural procurement initiatives helped improve the livelihoods of approximately 167,000 farming households nationwide, and the efforts in green packaging upgrades led to a substantial reduction in the consumption of PE plastics by over 12,700 tons.

Mixue has two major brands: the freshly made tea drinks brand Mixue and the freshly made coffee brand Lucky Cup. 

Gross profit from Mixue consistently accounted for over 95% of total revenue and gross profit, while Lucky Cup had been an immaterial contributor to the revenue and gross profit.

As of September 30, 2024, more than 99% of the company’s stores were franchised stores. Its global procurement network spans 38 countries across six continents.

Through its in-house R&D and production capabilities, the company offers a one-stop ingredients solution with full categories including products of syrups, milk, tea, coffee, fruit, grains, and condiments.

Mixue has five production bases in Henan, Hainan, Guangxi, Chongqing, and Anhui, occupying a total of approximately 0.79 million square meters and having a total annual production capacity of approximately 1.65 million tons.

The company’s self-operated warehouse system and dedicated delivery network are able to support the most extensive store network in China’s freshly made drinks industry. 

The warehouse system, which is the largest in the industry, comprises 27 warehouses nationwide, totaling approximately 350,000 square meters.

 

Market Opportunities

China’s freshly made drinks market is projected to grow at a compounded annual growth rate of 17.6% from 2023 to 2028 to reach 1,163.4 billion yuan in 2028, according to the company's projection released in the offering document. 

Within this market, mass-market, freshly made drinks, with a price per item not higher than 10 yuan, not only address growing consumer demands for value-for-money products but also offer fresher products and an engaging consumer experience compared to other mass-market drink products in the similar price range.

Consequently, the mass-market freshly made drinks segment exhibits the highest growth rate among all segments by price range within China’s freshly made drinks market, growing at a compounded annual growth rate of 22.2% from 2023 to 2028.

The freshly made drinks market in Southeast Asia, as measured by gross merchandise value, is projected to grow at a CAGR of 19.8% from $20.1 billion in 2023 to $49.5 billion in 2028, marking the fastest growth among major markets worldwide.

 

Retail Investors

The retail portion of Mixue’s IPO attracted more than HK$1.6 trillion ($205.9 billion) in subscriptions, and the original size of the retail tranche was increased to 50% of the total offering size. 

Retail investors borrowed nearly HK$1.83 trillion via brokerages to subscribe to the stock, oversubscribing the offering by 5,295 times.

Thus, Mixue surpassed a record set by Ant Group’s IPO in 2020 and Kuaishou Technology’s share sale in 2021, which both attracted around HK$1.3 trillion in margin loans from retail investors.

Some investors would bet that the share price would go up in the improved market environment, as the city’s Hang Seng Index has risen more than 20% from a January low.

Futu Securities lent as much as HK$1.07 trillion, followed by Phillip Securities with HK$333 billion, and some brokers offered zero-interest and highly leveraged loans to attract clients so they could buy shares.

Analysts said that individual investors benefited from the flexible financing that came out of changes introduced by the Fast Interface for New Issuance (FINI) platform.

The FINI platform allows brokers to prepay only for the maximum number of shares allotted in a public offering, avoiding the need to lock in funds for the entire excess amount. 

The lower cost for brokers to offer margin loans had made the IPO multiples higher.