China bubble-tea chain Chabaidao faced a sharp drop in its stock value on its first day of trading in Hong Kong, as its shares plummeted by nearly 40 percent. This decline comes as a setback for Hong Kong’s ongoing efforts to revitalize its financial markets.
Baicha Baidao, also known as Chabaidao, is based in Chengdu and managed to raise approximately HK$2.59 billion (US$330 million) through its initial public offering in November. However, the company’s shares quickly tumbled from their listing price of HK$17.50 to HK$10.80, marking a substantial 38 percent decrease before slightly recovering to close at HK$12.80.
This poor performance on the stock market represents the worst debut for a company raising over US$300 million since 2015, according to data from Bloomberg. Another new entrant, Tianjin Construction Development Group, also experienced a significant decline of over 30 percent despite raising around US$20 million in its IPO.
The struggles of these companies highlight the challenges faced by Hong Kong in attracting new listings and boosting investor confidence. The city has seen a decline in fundraising through IPOs for the past four years, prompting the government to introduce new measures aimed at enhancing market sentiment.
John Lee, Hong Kong’s leader and former security chief, expressed optimism regarding the recent initiatives announced by China’s securities regulator to support trading activities. These measures include facilitating cross-border trading for various funds, such as real estate investment trusts, and encouraging prominent Chinese companies to list in Hong Kong.
Despite reporting strong profits in February, the Hong Kong Stock Exchange witnessed a limited number of IPOs in 2021, raising only HK$46.3 billion through 73 listings. The decline in IPO activity can be attributed to Beijing’s regulatory crackdown on Chinese firms since 2020, which led to a postponement of listing plans by several major companies.
The cancellation of Ant Group’s IPO, a subsidiary of Alibaba, in 2020 initiated a broader regulatory tightening that affected multiple sectors and resulted in significant market value losses for Chinese companies. As a result, many firms have been cautious about pursuing IPOs, impacting Hong Kong’s efforts to rejuvenate its financial markets.
