Summary of Key Points
The announcement by Shanghai Auntie, in which six institutional shareholders decided to "extend their lock-up period while reserving the option to reduce their holdings," caused the stock price to plummet by more than 25% over two days, resulting in a market value reduction of HK$3.1 billion. Behind this event lies a deeper contradiction: numerous new tea beverage companies planning to go public in 2025 are collectively facing the pressure of institutional share sales restrictions, as the industry transitions from "expansion" to "competition for existing markets." While the financial reports of these brands appear impressive, franchisees are experiencing high closure rates and longer payback periods. The capital market's valuation logic has also shifted from focusing on growth rate to examining the profitability of individual stores and the potential of new businesses.
Why Did the Institutional "Positive" Announcement Become a Stock Price Bomb?
The announcement on August 9th was intended to reassure the market: six institutional shareholders stated they would continue to hold their shares for another three months, but they added a condition—each could sell up to one-third of their holdings, with the total reduction not exceeding 3.5% of the total shares.
Why didn't the market buy into this? The key lies in the flexibility allowed for share sales: institutions could have chosen not to sell at all, but by reserving that option, they signaled their intention to cash out gradually. Considering their investment costs, early investors (such as Suzhou Yizhong, which invested in the company's Series A round at HK$11.96 per share) are now seeing a profit of over six times their initial investment, with the current stock price around HK$87 (about RMB 78). Similarly, investors from Series B rounds have also seen a more than doubling of their returns. With such substantial profits, it's no wonder institutions were eager to realize them.
As soon as the announcement was released, investors interpreted it as a sign that institutions were preparing to sell off their shares, leading to panic and a sharp drop in the stock price.
New Tea Beverage Companies Collectively Face the Pressure of Share Sales Restrictions
2025 has been a year of significant new tea beverage company listings, with brands like GuMing, Mixue Group, and Shanghai Auntie all going public on the Hong Kong Stock Exchange. In 2026, these companies' institutional shareholders will begin to sell their shares, and the resulting pressure is evident in the stock prices:
- After Mixue Group's shares were released for sale in March, its market value dropped from a peak of HK$23 billion to HK$87.6 billion, nearly halving;
- GuMing's stock price fell from HK$31 to HK$22.88 after its share sales restrictions were lifted last August, a decrease of 25%;
- Shanghai Auntie's market value also plummeted, from over HK$20 billion to HK$9.1 billion on the day of its listing.
The logic of institutional shareholders is straightforward: they invest in companies with the expectation of making profits and exiting through stock sales once they go public. With such high returns, it would be unusual for them not to sell their shares now. This is a common challenge for the entire new tea beverage sector.
Financial Reports Look Impressive, but Franchisees Suffer
Shanghai Auntie's financial reports show impressive figures: revenue in 2025 was HK$4.46 billion (a 36% increase), and net profit was HK$500 million (a 52% increase); the first half of this year saw revenue of HK$2.589 billion (a 42% increase) and net profit of HK$321 million (a 58% increase). However, most of these profits come from franchisees, as the company generates only 35% of its revenue from direct-operated stores.
Franchisees are facing tough circumstances:
- A sharp rise in closure rates: from 3.98% in 2023 to 12.11% in 2025, more than twice the rates of competitors like Mixue (4.2%) and GuMing (4.8%);
- Longer payback periods: new stores used to recover their costs within 12-18 months, but now it takes over two years in key urban areas;
- Increased financial pressure: high commissions from delivery platforms (around 20%), frequent promotional offers (buy one get one free, discounts), rising rent and labor costs, and increased competition from multiple tea beverage stores in the same area.
Without profitable operations, franchisees have no choice but to close their shops. The model of growth based on expanding store networks is no longer effective.
The Industry Is Entering a Phase of Competition for Existing Markets
Previously, the new tea beverage market was characterized by rapid expansion; more stores meant growing demand, and brands could grow simply by opening new outlets. However, this situation has changed:
- The total number of stores has decreased for two consecutive years, with 28,000 fewer stores nationwide in 2025;
- Consumer preferences have become more fixed, making it difficult for new brands to attract customers;
- Brands are shifting to a more strategic approach, focusing on optimizing existing stores (e.g., opening smaller formats to lower franchise fees) and exploring new businesses (such as ice cream and bottled beverages).
The capital market's valuation logic has also changed, with focus now on the profitability of individual stores, their sustainability, and the potential of new ventures. The continuous decline in the valuation of the new tea beverage sector reflects the market's rational adjustment to this new phase.
Conclusion
The sharp drop in Shanghai Auntie's stock price is not an isolated event; it marks a turning point for the industry as it moves from rapid growth to more focused and strategic development. The combined pressures of institutional share sales restrictions, franchisees' difficulties, and changes in industry dynamics have caused this market fluctuation. For consumers, this may mean accessing more innovative products in the future. For investors, it's crucial to assess a brand's true strength—not just its scale but its ability to generate profits consistently from each store.