HONG KONG, July 2, 2021 — infopulsetoday.com —The retail investors who piled into Nayuki Holdings Ltd.’s stock offering last week did so at a rate not seen in months. More than 400 times oversubscribed, the retail tranche of the bubble tea chain’s IPO signaled something beyond just thirst for milk tea. It marked a turning point.
Hong Kong’s IPO market had been in a funk. Just 13 companies listed in April.
Four in May. The slow start to 2021 reflected broader caution. Global technology stocks were selling off.
Investors were skittish about tighter monetary policy from China. They had become picky.
Then Nayuki came along. The Shenzhen-based company sold 257.3 million shares at HK$19.8 each. That was the top of the range — HK$17.20 to HK$19.80.
The pricing alone told a story. Underwriters could have settled lower. They didn’t.
Demand was strong enough to push the price to the ceiling. Five big investors signed on for roughly US$155 million in shares before the public offering even opened.
UBS Asset Management. China Universal Asset Management. China GF Fund.
China Southern Asset Management. CCB International.
Their names in the prospectus gave smaller buyers cover. If institutions were in, the thinking went, the deal was safe. The retail crowd agreed.
More than 400 times oversubscription means for every share available to individual buyers, there were more than 400 orders. That kind of frenzy had been rare in Hong Kong recently. The last big one was Angel Technology Co., the transparent orthodontic braces maker that surged 132% on its June 16 debut.
That offering became one of the year’s most popular. Nayuki looked set to follow.
But not every listing works. China Youran Dairy Group Ltd. and CARsgen Therapeutics Holdings Ltd. both opened lower on their first trading day last Friday. Youran rose only 12%.
CARsgen gained just 9%. Those are not disasters.
They are also not the kind of returns that make retail investors feel lucky. The market remains selective. One analyst, speaking to Bloomberg on condition of anonymity, said the global technology sell-off had actually created a more favorable situation for Nayuki’s debut.
The logic: money flows out of tech stocks and into consumer names. A milk tea chain is about as consumer-facing as it gets. Nayuki has 500-plus stores across China.
It sells tea-based drinks with cheese foam toppings and fresh fruit. It is not a high-growth tech unicorn.
It is a beverage company. In a market where investors are looking for safety, that might be exactly the point. Founders Peng Xin and Zhao Lin started the chain in 2014.
Seven years later, their stakes are worth at least US$1.1 billion. That is real money.
It is also a measure of how far the company has come. The IPO raised US$656 million total. That is a lot of bubble tea.
The Hong Kong exchange has been trying to attract big Chinese consumer names. Nayuki is one of the first. If it trades well, others will follow.
If it stumbles, the recovery in Hong Kong IPOs could stall. The next few trading days will tell.
