[NEW YORK] Chinese tea chain Chagee Holdings managed what in April 2025 seems like an impossible feat: not only did it pull off a successful US initial public offering (IPO) in the middle of a tariff war, its shares are trading above its offering price. Its playbook offers a few rays of hope for firms considering going ahead with deals.
The company raised US$411 million in its US IPO, with shares closing 16 per cent higher in its debut session as a public company. They remain 10 per cent above the IPO price even as the S&P 500 Index has shed 3.4 per cent since Chagee’s debut. Its performance despite the volatility can be chalked up to a combination of sector and strategy.
“Chagee has a large following, it’s not a traditional sort of IPO,” said David Koch, co-head of capital markets at Brown Gibbons Lang & Co.
He pointed to the strength of the chain’s brand in Asia, where it has 6,440 locations, according to a filing, as well as the base of investors that agreed to buy shares even before the formal order-taking process began.
“No matter how good an equity story it is, how good the fundamentals are, how excited people are about that IPO, until you open the book, you are basically naked to the market risk – unless you have created an anchor order process in the deal,” Koch said.
Funds affiliated with CDH Investment Management, RWC Asset Management and RWC Asset Advisors (US), Allianz Global Investors Asia-Pacific and Orix Asia Asset Management had agreed to acquire as much as US$205 million worth of American depositary shares (ADS) in aggregate. They ultimately were allocated 4.85 million ADS, representing about a third of the shares on offer, the filing shows.
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Such a public commitment will have helped reassure prospective backers. Chagee saw interest for several times the shares available ahead of the IPO, with Chinese funds and global long-only institutions among those weighing investment, Bloomberg News reported.
Another advantage for Chagee is that its business less likely to be directly hit by tariffs on the country, analysts have said.
Investors scrutinise corporate supply chains and look at imports and exports that could increase output costs, according to Koch. “When you have companies that have a lot of demand, raw materials or costs, coming from external countries, you cannot price the risk,” Koch said.
Koch listed several sectors he expects to show resilience despite the trade measures, including health-care services, food and beverage and defence, as well as certain infrastructure companies in highly regulated businesses and with stable cash flow.
“We feel comfortable about these sectors’ future cash flow and earnings and expect to see a good appetite regardless of the tariffs,” Koch added.
For companies in the IPO pipeline not in those sectors, options are more limited. Dean Quiambao, a partner with California-based technology consulting firm Armanino, is hearing from chief financial officers and boards of directors – including of some pre-IPO companies – that firms are shifting their focus to one thing they can control: cost cutting.
“Everyone is talking about doing more with less and integrating more AI into their businesses,” Quiambao said.
Cost-cutting measures are important not just for hitting the right price for a company that goes public, but also for their ability to hit forecast results quarter after quarter, he said. BLOOMBERG
