Bubble Tea Bubble Bursts? Popular Brand’s Shares Plunge in IPO

The bubble tea craze has taken over cities of all sizes in the United States, but things aren’t looking good for a popular chain, whose initial public offering (IPO) tanked on the Asian market. 

CNN is reporting that the Chinese chain Sichuan Baicha Baidao — known by the names ChaPanda and Chabaidao — made its IPO debut on Tuesday, April 23, at $17.50 Hong Kong dollars ($2.23) per share, but prices tumbled to a measly $10.80 Hong Kong dollars ($1.38) per share during the first two trading hours. The company’s shares finished at $12.80 Hong Kong dollars ($1.63) per share at the end of the trading day, down 27% from their listing price. 

These results don’t look promising for ChaPanda, which is China’s third-largest retailer of the popular tea-based drinks and has opened more than 8,000 locations since its launch in 2008.

Bubble Tea & Boba’s Popularity in the United States

Bubble tea — a tea drink made of tea, milk, and boba pearls made from tapioca or fruit jelly — originated in Taiwan in the 1980s and quickly earned a worldwide cult following. In 2013, the viral success of the song “Bobalife (Make it Tasty)” by the Fung Brothers threw bubble tea into the American mainstream. 

Before the song’s popularity, bubble tea didn’t make a significant impact on the American market. In 2020, Dunkin’ tested the launch of bubble tea and bubble iced coffee at some of its retail locations in Massachusetts, but it didn’t take long for the drink — which had a “niche fan base” — to be phased out of the stores. 

More recently, Domino’s in Taiwan launched a specialty pizza featuring the tea’s tapioca pearls, but this short-lived experiment was limited to the chain’s Asian market. 

With the ChaPanda loss, however, experts are suggesting that the proverbial bubble tea bubble may have burst.

IPO Slump

ChaPanda’s downturn doesn’t look promising for its competitors, especially since it was Hong Kong’s largest market debut of 2024, according to Dealogic data, with an impressive $330 million raised in its initial IPO from investors. 

Mixue Group and Guming Holdings — two of ChaPanda’s most notable competitors — also applied for IPOs back in January, but they have yet to materialize. Another Chinese bubble tea maker, Nayuki, has lost 88% of its stock value since 2021 when it went public. 

The question, however, remains as to whether this is a sign of the declining popularity of bubble tea or a symptom of a struggling Chinese stock market. A CLSA survey showed that 94% of Americans ages 20-29 made some type of bubble tea purchase in the first three months of 2021, which shows that the product may remain viable in the U.S.

Recent investments in the Chinese stock market, however, have not proven viable to foreign investors, as those who invested in the beleaguered China Evergrande found out in January when the company was directed to liquidate by the Hong Kong court after accruing more than $300 billion in debt. 

“The overall turnover and valuation of the (Hong Kong) stock market, which depend on the market liquidity, i.e. funds, remained low,” Robert Lui, a capital markets analyst at Deloitte, explained in a report this month. 

It remains to be seen what these developments mean for the bubble tea market in the United States.