A young Chinese entrepreneur has joined the billionaire ranks after his tea shop chain listed on a US stock exchange, despite growing tensions between China and the United States.
Junjie Zhang, age 30, saw his company, Chagee Holdings, begin trading on the Nasdaq on Thursday. The initial public offering (IPO) raised $411 million, pricing at the top of its expected range. This successful listing comes at a time when the US IPO market has been very quiet, and some experts question whether Chinese companies will be allowed to remain on American exchanges.
Chagee’s shares rose 16% on the first day of trading, closing at $32.44. This gave Zhang a net worth of $2.1 billion, according to Bloomberg’s wealth tracking index, which is calculating his fortune for the first time. His entire wealth comes from his ownership stake in Chagee. When contacted, representatives from the company declined to comment.
Zhang, who serves as Chagee’s CEO, is part of a trend of Chinese entrepreneurs making fortunes through fresh tea chains that have become wildly popular. This includes the two brothers behind Mixue Group, known for selling $1 bubble tea, coffee and ice cream, who together amassed about $8 billion after their company went public in Hong Kong earlier this year.
However, the tea market in Hong Kong has become increasingly crowded, according to Shen Meng, a director at Beijing-based investment bank Chanson & Co. Several bubble tea companies that recently went public have seen their stock prices drop shortly afterwards, as investors become cautious about putting money into an overcrowded market.
“The scale of capital focused on new tea beverages has declined, meaning that a Hong Kong IPO would likely struggle to deliver strong results in terms of valuation and fundraising size,” said Shen. “For Chagee to achieve securitisation, the US stock market is now virtually the only viable option.”
Read Also: First Holdco reports N663bn after-tax profit, highest in 12 years
Zhang started Chagee in 2017 in Yunnan, a southwestern Chinese province that borders Myanmar, Laos and Vietnam. The company’s name comes from a classic Chinese tragedy called “Farewell My Concubine,” which tells the story of a warrior king from ancient China and his romantic farewell to his lover. The company logo features a huadan, which is a young woman character in Peking Opera.
Unlike bubble tea brands known for sugary drinks filled with tapioca pearls, Chagee focuses on premium, milk-based teas using traditional Chinese varieties like green, black and oolong. Its stores have a lounge-like atmosphere similar to Starbucks locations. A typical Chagee drink costs just over $2.
The brand has grown rapidly as health-conscious consumers increasingly avoid high-calorie bubble teas. Speaking at a forum in May, Zhang said the company aims to bring back “ancient tea-making methods that date back 900 years” using modern technology.
According to market research cited in the company’s prospectus, China’s freshly-made tea drinks market is expected to reach 426 billion yuan ($58 billion) by 2028, up from 273 billion yuan last year. Premium tea drinks, with an average price of 17 yuan ($2.30) per cup, made up 26% of the market last year compared to just 11% in 2019.
