Chinese bubble tea company Mix targets $500 million at its Hong Kong IPO in February, sources say

Scott Murdoch and Julie Zoo

Sydney/Hong Kong (Reuters) – Mixgroup, China’s largest bubble tea company, will begin bookbuilding for Hong Kong’s initial public offering by the end of February, raising about $500 million.

Mixue is scheduled to begin trading on the Hong Kong Stock Exchange in early March. There are 40,000 stores across China, according to regulatory filings.

Sources asked not to identify any discussion of confidential information. Mix declined to comment.

Mixue had planned to raise up to $1 billion from the Hong Kong IPO. However, two sources say that the company is desperately not requiring cash, so the size of its stock sales is shrinking.

According to regulatory filings, the mix’s net profit was 3.5 billion yuan ($478.96 million) in the nine months ended September 30th last year.

The company plans to use the funds raised through the IPO to help expand production facilities and increase the range of drinks.

The deal comes after rival bubble tea operator Guming raised $232 million from the Hong Kong IPO, which is at the top of its price range. The size of the IPO has increased due to strong demand from investors.

Gumming shares began trading in Hong Kong on Wednesday, with shares on Tuesday rising 12% in grey market transactions run by broker Philip Securities.

The Gumming and Mix IPO signaled a freeze last year when regulatory authorities approving listing applications for bubble tea companies.

Regulators were concerned about a bubble tea company listed in Hong Kong after Sichuan Baicha Baidao fell 27% on the first day of trading last April after $330 million in stock sales.

Inventory is currently down by around 45%.

($1 = 7.3075 Chinese Yuan Renminbi)

(Reporting by Scott Murdoch of Sydney and Julie Zoo of Hong Kong, edited by Peter Graf and Aidan Lewis)