Drinks chain is expected to begin trading on March 3 in Hong Kong

A Mixue shop in Mong Kok. Photo: Handout

The retail portion of the Hong Kong initial public offering (IPO) for China’s largest fresh-drinks chain, Mixue Group, attracted more than HK$1.6 trillion (US$205.9 billion) in subscriptions, and the shares intended for those investors will be increased to 50 per cent of the total, according to a person familiar with the matter.

In terms of margin loans, retail investors borrowed nearly HK$1.8 trillion via brokerages to subscribe to the stock, an oversubscription of more than 5,100 times relative to what was allocated to them, or 10 per cent of the HK$3.45 billion IPO, according to consolidated brokers’ data as of 10.45am.

By this standard, the IPO surpassed a record set by Ant Group’s scuttled IPO in 2020 and Kuaishou Technology’s share sale in 2021, which both raked in around HK$1.3 trillion in margin loans from retail investors.

The company was expected to announce subscription levels for retail and institutional investors on Friday. Trading is expected to begin on March 3.

The IPO attracted five cornerstone investors who agreed to buy US$200 million worth of the shares. They were British asset manager M&G Investments, HongShan Capital’s growth fund, a unit of Boyu Capital, a Hillhouse Group fund and Meituan’s Long-Z Fund.

The endorsements from large funds, the recent stock market rally and the easy margin financing terms offered by brokers contributed to the hype among individual investors for Mixue’s IPO, analysts said.

“The atmosphere in the entire stock market is different now, which has a positive impact on IPOs,” said Katerine Kou, chairwoman of the Hong Kong Securities Association. Some investors would bet on the share price to go up in this improved environment, she said, as the city’s Hang Seng Index has risen more than 20 per cent from a January low.

Mixue began its book-building process on February 21, offering 17.1 million shares at HK$202.50 each, with a minimum investment requirement of HK$20,454.22 for a lot of 100 shares.

A base case valuation for Mixue suggested a market capitalisation of HK$95 billion or a target price of HK$254, which was 26 per cent higher than the IPO price, analyst Douglas Kim said in a note published on investment intelligence platform Smartkarma on Tuesday.

Kou said individual investors benefited from the flexible financing that came out of changes introduced by the Fast Interface for New Issuance (FINI) platform.

The FINI platform allows brokers to prepay only for the maximum number of shares allotted in a public offering, avoiding the need to lock in funds for the entire excess amount. The lower cost for brokers to offer margin loans had made the IPO multiples higher, Kou said.

Earlier this month, Hong Kong’s market watchdog launched a review of eight brokerages to examine their margin financing practices after witnessing heavy oversubscriptions for some IPOs.

Mixue’s subscription level is comparable to that of Chinese toymaker Bloks Group, which completed its HK$1.6 billion IPO last month with retail investors subscribing for 6,000 times the shares that were allocated to them.