The market value of Tea Baidao evaporated 5.7 billion in 1 minute after the opening, and Gu Ming and Shanghai aunts were not panicked

Produced by One View Commercial

Author/Meng Jiayi

Editor/Xue Xiang

On April 23, 2024, Tea Baidao rang the bell on the Hong Kong Stock Exchange and was successfully listed, becoming the second new tea beverage listed brand after Nai Xue's tea. Tea Baidao issued approximately 148 million shares at an issue price of HK$17.50, and the net proceeds were approximately HK$2.456 billion based on the issue price.

CICC was the sole sponsor of the Hong Kong public offering of 10%, the international offering of 90% and the over-allotment option of 15%.

It is worth noting that Chabaidao suffered a serious breakdown on the first day of listing, and the market value evaporated 5.7 billion yuan in the first minute of opening, and the stock price fell by 38% at one point. As of the end of the trading day, the share price of Chabaidao was 12.8 yuan, down 26.86%, with a market value of 18.91 billion yuan.

As of the latest practicable date, Tea Baidao had a total of 8,016 stores in China, as disclosed in its latest listing filing. As the scale continues to grow, Chamodo has also reached more consumers. In 2023, Chabaidao will sell 1.016 billion cups of tea in a year, with a total retail sales of 16.9 billion yuan.

At the same time, since 2021, Chabaidao's revenue and net profit have continued to grow, with a compound annual growth rate of 21.6%. In 2023, Chabaidao's annual revenue will be 5.704 billion yuan and its net profit will be 1.151 billion yuan.

Judging from the business data of Tea Baidao, its results are not bad, why did it break?

From the perspective of One View Business, there are three main reasons.

First, the growth of tea Baidao is insufficient. In terms of market share, according to Frost & Sullivan's report, in terms of retail sales in 2023, the market share of Chabaidao is only 6.8%, ranking third. Mixue Bingcheng 17.8%, Gu Ming 7.8%, Shanghai Auntie 4.2%, Hey Tea 3.6%. Tea Baidao is not only facing the sinking of high-end tea brands such as Hey Tea, but also has to deal with the challenges of ancient tea and Bawang Tea, in addition, coffee is also encroaching on the tea market. It's a little difficult for Cha Baidao to get ahead.

From the perspective of scale growth rate, it is difficult for Chabaidao to maintain the rapid growth in the first two years. Since Chabaidao is a traditional tea beverage enterprise, more than 90% of the revenue depends on the sales of goods and equipment to franchisees, which leads to the need for Chabaidao to use the scale to support revenue. A glance at business statistics found that Tea Baidao only added 1 store in March, when the growth rate of the scale slowed down, the revenue of Tea Baidao slowed down is inevitable.

Second, the issue price of tea Baidao is too high. Based on Chabaidao's 2023 revenue and today's exchange rate, the price-to-earnings ratio of Chabaidao's issue price is about 20.77. In comparison, Luckin, which ranks first in the coffee track, has a price-to-earnings ratio of 17.6 today. Obviously, Chabaidao is overvalued, and the breakout is to return the stock price of Chabaidao to its proper level.

At the same time, the breakout is very likely to cause an "avalanche" of stock prices. Yu Fenghui, an expert consultant of the Hong Kong Top 100 Research Center, told One View Business that the breakout will hit the confidence of investors, partners and consumers in Chabaidao, and affect the company's market position and brand image.

In May and June 2023, Chabaidao received investments from Orchid Asia, Zhengxin Valley Capital, New Hope Tomato Private Equity and CICC Capital at a price of RMB13.2 per share, with a 12-month lock-up period. Now, less than one month before the first wave of lifting the ban, with the stock price performance of Chabaidao, investors are likely to choose to sell their stocks, which further leads to the decline of Chabaidao's stock price.

Third, from the perspective of equity structure, Chabaidao is a real "private enterprise", and investors are worried about being cut leeks. Before the equity restructuring in 2023, Chabaidao will be 90% owned by Hengsheng Herui, and Wang Xiaokun will hold 10% of the equity. Hengsheng Herui is 84.89% owned by Chengdu Jinbaisen, while Wang Xiaokun holds 60% of Chengdu Jinbaisen. This means that the tea Baidao is basically owned by Wang Xiaokun personally.

After the equity restructuring, Chabaidao is directly owned by Hengsheng Herui with about 67.68% of the equity, and Wang Xiaokun directly owns about 18.02% of the equity. This represents more than 80% of the equity held by Wang Xiaokun. After the introduction of strategic investors on May 22, 2023, Wang Xiaokun still holds more than 80% of the shares.

As a listed company, the high concentration of equity in the hands of the founders may lead to insufficient liquidity in the stock market on the one hand, affecting the trading activity and price stability of the stock, and on the other hand, once the major shareholder leaves, the blow to retail investors is devastating. It may be that there are such concerns that make investors so cautious.

In fact, the subscription and fundraising process before the listing of Tea Baidao was not very smooth. According to market rumors, as of 9 o'clock on April 17, the subscription of Chabaidao was not enough, and the subscription multiple was only 0.33, and there was even a phenomenon of pumping. In contrast, the other two new shares in the Hong Kong IPO market were subscribed by 38 times and 8 times respectively during the same period. At the same time, the tea performance of Nai Xue, the "first share of new tea drinks", is also poor, with a closing price of HK$2.28 today, with a market value of less than 4 billion.

All of the above data illustrate investors' distrust of the new tea industry, and also reflect that the new tea industry is facing a bottleneck.

The growth rate of the new tea beverage industry is slowing down, and investors may be worried that the industry has entered a mature stage, and the growth space of enterprises is questioned. At the same time, the speed of product innovation is fast, but the threshold for imitation is low, and it is difficult to form a lasting competitive barrier between enterprises, and the substitution is strong. In addition, Yu pointed out that the frequent occurrence of food safety problems has also exposed management loopholes in the industry, increasing regulatory pressure and potential legal risks, and investors are worried that companies may pay high compliance costs and brand repair costs.

At the same time, the investment environment of new tea drinks has entered a cold winter. One View Business Statistics found that in 2021, there will be a total of 24 financings in the new tea beverage industry, with a total amount of 8.322 billion. In 2022, the financing amount will fall off a cliff, only 4.6 billion. In 2023, the data will suffer a double decline, and the number of financing will only be 2 tea Baidao and Hetian water shop, of which Cha Baidao will receive 1 billion financing.

The combination of industry risks and changes in the preference of capital has led to pessimistic expectations for the new tea industry. At present, only two new tea companies are "sitting on the cold bench" in the capital market, and other new tea companies waiting to be listed are also facing huge pressure.

It is worth mentioning that the listing of Chabaidao did not introduce cornerstone investors. Gu Jilin, co-founder of Tea Baidao, confidently said that the company has many anchor investors, and the pricing also has "water level" for investors, which will definitely be "mutually beneficial and win-win".

Judging by the results, there is not much in the water, investors are losing, the market refuses to buy it - no one can laugh.