Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Chinese tea company Chagee is set to brave choppy market conditions and an intensifying trade war between the world’s two largest economies as it seeks to raise almost $400mn on its New York debut this week.
The Shanghai-based chain, which specialises in coffee-style drinks such as “teaspressos” and oolong “teapuccinos”, is hoping to raise $396mn ahead of its first day of trading on Nasdaq on Thursday, according to filings with US regulators.
The company will aim to sell 14.6mn shares at between $26 and $28 each, implying a fully diluted market capitalisation of about $5.2bn.
If successful, it would be the second-biggest Chinese listing in the US in more than three years, behind only the $411mn raised by electric vehicle group Zeekr in May last year, according to Renaissance Capital, a provider of IPO research.
Chagee’s offering comes days after the Trump administration increased tariffs on Chinese goods to about 120 per cent amid a trade war that economists expect to hit global economic growth.
Several large US initial public offerings were postponed shortly after Donald Trump’s “liberation day” tariff announcements on April 2.
But the market turbulence has not stopped “a wave” of 24, mostly microcap, Chinese companies from listing in the US this year, said Matthew Kennedy, a senior strategist at Renaissance.
Chagee’s prospectus lists “trade disputes” and changing US “foreign investment laws” as key risk factors.
Goldman Sachs this week highlighted growing concerns that Trump may force Chinese companies to delist from US stock exchanges, writing in a note to clients: “In an extreme scenario, US investors may have to liquidate $800bn worth of holdings in Chinese stocks.”
A person close to Nasdaq told the Financial Times the exchange had not heard from the White House on the matter.
Some market participants also questioned why Chagee, which hopes to expand overseas, chose the US, given rival Chinese tea companies Guming and Mixue have surged 82 per cent and 51 per cent since they went public in Hong Kong in February and March, respectively.
“I don’t see why they would list as an [American depositary receipt] versus a local listing,” said a US-based fund manager.
The person pointed to Mixue’s massively oversubscribed retail order books but added Chagee’s IPO “might work” given it was “performing well as a group”.
Chagee’s business in China is booming, according to the company’s IPO prospectus. It ran 6,440 tea houses — 97 per cent of which are in China — at the end of last year, up 83 per cent on 2023, while net revenues rose 167.4 per cent year on year to just under $1.7bn. Net income rose to $344mn.
US coffee chain Starbucks, in comparison, has 7,600 stores across China.
Citigroup, Morgan Stanley, Deutsche Bank and investment bank China International Capital are acting as lead underwriters.
CDH Investment Management, RWC Asset Management, Allianz Global Investors Asia Pacific and ORIX Asia Asset Management have indicated their “nonbinding” interest in purchasing 51.7 per cent of the shares set to go on sale, Chagee said in its prospectus.
About 9 per cent of Chinese tea by volume was exported to the US last year as suppliers rushed to beat expected levies under Trump. Chinese tea shipped to the US are set to face a tariff above 100 per cent.
“Serious [US] tea drinkers will be seriously impacted,” said Dan Bolton, tea editor at STiR Coffee and Tea Magazine, adding that the drink had historically been one of China’s “greatest ambassadors” and “paved the way for trade and negotiations”.