By Scott Murdoch and Donny Kwok
HONG KONG (Reuters) -Shares in Chinese tea shop chain Sichuan Baicha Baidao Industrial fell by as much as 38.3% on Tuesday in its Hong Kong trading debut following a $330 million initial public offering (IPO).
The shares were sold at HK$17.50 ($2.23) each in the IPO, which is the largest in Hong Kong so far in 2024.
The first day's trading performance marks the worst IPO debut for a company in Hong Kong that raised more than $100 million in at least a year, according to Dealogic data.
Baicha Baidao shares opened down 10.1% and sold down during the day to reach as low as HK$10.80. The stock ended 26.9% lower at HK$12.80. That compared to a 1.9% rise in Hong Kong's benchmark Hang Seng Index.
The company operates about 8,016 ChaPanda stores in a franchise model in 31 mainland China provinces and municipalities. Retail sales value of ChaPanda stores in 2023 reached 16.9 billion yuan ($2.33 billion), according to the company's prospectus.
The shares had been offered to investors at a fixed price of HK$17.50 rather than in a range that would have given the underwriters the ability to set a final price after gauging demand.
Baicha Baidao's IPO attracted tepid interest from investors, which analysts blamed on the company's complicated business structure and large franchise network.
Hong Kong retail investors did not take up the full amount of shares on offer for them, according to the company's regulatory filings.
The retail tranche was only 0.5 times covered, which meant 7.44 million shares were reallocated to institutional investors.
The institutional tranche was 1.1 times covered, which is considered weak, especially compared to Hong Kong's IPO boom times in 2020 and 2021 when deals were hundreds of times covered.
Hong Kong's IPO market has raised $625 million so far in 2024, Dealogic data shows, which is the slowest start to a year since 2009.
"The Hong Kong IPO market sentiment is so low that I don't think it can go much lower from here," said Sumeet Singh, Aequitas Research director who publishes on Smartkarma.
"I don't think anyone was expecting the company to do much at listing so it probably won't end up impacting sentiment overall."
($1 = 7.8357 Hong Kong dollars)