{"text":[[{"start":8.18,"text":"Half full or half empty?"}],[{"start":9.959999999999999,"text":"It was a little of both for Bama Tea Co. Ltd., whose application for a Hong Kong IPO expired earlier this month just as its planned listing received a key regulatory approval from the China Securities Regulatory Commission (CSRC). Fate has so far refused to smile on this major cultivator and seller of leaves used to make China’s favorite beverage, which has tried but failed to go public three times."}],[{"start":40.44,"text":"Having received the CSRC’s blessing, the company must now file an updated application again with the Hong Kong Stock Exchange. Its chances of brewing up success seem stronger this time, as it looks likely to sail through the stock exchange’s approval process."}],[{"start":58.17999999999999,"text":"In an announcement on its website on June 17, the CSRC formally registered Bama’s plan to list in Hong Kong by selling up to 29.13 million shares. Concurrently, the regulator disclosed that 106 Bama shareholders plan to convert about 44 million of the company’s shares into stock that can be traded in the Hong Kong listing."}],[{"start":84.77,"text":"Bama is one of China’s better known tea brands, with a history dating back more than 300 years. Information on its website draws heavily on that dazzling past. In the year 1742, Wang Shirang, a famous official in South China’s Fujian province, presented the tea to the Qing Dynasty’s Qianlong Emperor. The emperor praised the drink and dubbed it tieguanyin, which has become one of China’s most recognizable types of tea today. Thereafter, Wang became known as the “godfather of tieguanyin.”"}],[{"start":121.5,"text":"Wang Wenli and Wang Wenbin, two brothers descended from the 13th generation of the Wang Shirang family, established Bama Tea more than two and a half centuries later in 1997. Its tieguanyin leaves are the company’s crown jewel, while it also sells related products like tea sets, tea tables and tea snacks."}],[{"start":145.25,"text":"The Wang brothers have gone to great length to squeeze as much value as possible from the tieguanyin name and its imperial origins. Whether the tale is true or merely a sales tactic is anyone’s guess. Still, there’s nothing like a good story to sell a product, and no one appears to be challenging the company’s account, at least not yet."}],[{"start":168.94,"text":"Arduous IPO journey"}],[{"start":171.03,"text":"Like its history, Bama’s journey to the capital market has been long and also arduous. It first listed on the National Equities Exchange and Quotations (NEEQ) market in Beijing, also known as the “New Third Board,” but later withdrew from the thinly traded exchange in 2018. Three years later it filed for an IPO on the Nasdaq-style ChiNext board of the Shenzhen Stock Exchange, only to abandon that effort in 2022. Later it filed to list on the Shenzhen Exchange’s main board, but again terminated that effort in 2023."}],[{"start":210.92000000000002,"text":"With a listing on a major stock exchange finally in sight, investors are taking a closer look at the company’s finances and more recent past, exploring whether it looks like a good investment."}],[{"start":224.45000000000002,"text":"According to its initial Hong Kong Stock Exchange filing in January, the company earned 2.12 billion yuan ($296 million) in revenue in 2023, up 16.8% year-on-year, while its net profit rose 9% to 206 million yuan. Its growth mostly dried up in 2024, as its 1.65 billion yuan in revenue for the first three quarters of the year was up less than 1%, while its profit rose 5.8% to 208 million yuan. A new listing application should include final financials for all 2024, and probably data for the first and possibly second quarters of 2025."}],[{"start":271.89,"text":"Franchise model concerns"}],[{"start":274.08,"text":"The company’s business model could also be a source of investor concern. By the end of last September, the company had 3,498 stores, 92% of those franchised. Of its revenue pie, about half came from those franchisees."}],[{"start":292.90999999999997,"text":"The biggest problem for franchisers has always been keeping their franchisees in line, which is key to smooth operations and maintaining quality and consistency. Failure to do that often leads to problems, including potential lawsuits over food safety and other quality issues in extreme cases."}],[{"start":314.24999999999994,"text":"Bama is no stranger to such perils. The Black Cat Consumer Complaint Platform reveals multiple grievances against the company’s products, from people who detected small bugs in some tea after brewing, to others who discovered tea leaves that turned blue after soaking in water for a while. Some franchisees have also been accused of mixing lower-quality tea leaves with Bama’s products to boost their profits."}],[{"start":341.72999999999996,"text":"The company also faced questions at the time of its ChiNext listing attempt in 2021. At that time, the Shenzhen Stock Exchange inquired three times about inventory cycles of Bama’s franchisees, including how well their incoming shipments matched their sales and whether they were building up inventory of unsold tea leaves."}],[{"start":364.81999999999994,"text":"Affiliated transactions"}],[{"start":367.16999999999996,"text":"The company’s touting of three centuries of history and imperial court association naturally leads to expectation that Bama uses proprietary techniques to produce its products. But the reality is a bit different, since the company outsources a large part of its production to third parties. Such practice may raise some eyebrows, leading to doubts over Bama’s claims of carrying on a centuries-old family tradition."}],[{"start":394.85999999999996,"text":"Contracting out production could also lead to quality concerns. In 2017, Bama was censured by China’s state media for substandard quality of some of its oolong tea samples that contained impurities exceeding safety standards."}],[{"start":411.34,"text":"Some may also worry about the company’s web of business ties with other entities related to the Wang family through marriages. For example, one company called Septwolves owns 2.61% of Bama’s shares; sportswear giant Anta has affiliated transactions with the company on tea purchases; and Gaoli Holding Group has supply chain collaboration with the company. All of those companies are connected to Bama through marital ties. The CSRC flagged those affiliated relationships when Bama filed for its listing on the Shenzhen Stock Exchange’s main board in 2022."}],[{"start":451.98999999999995,"text":"Tea-related stocks have become a hot commodity in Hong Kong this year as the exchange emerged from a three-year slump. Bubble tea chains have become the main stars within that group, while enthusiasm toward the traditional tea sector that Bama occupies remains more lukewarm. That may be partly because listed traditional tea stocks such as Pu'er Lancang Ancient Tea (6911.HK) and Ying Kee Tea House (8241.HK) are still losing money. Bama breaks that mold with its profitability, though its checkered history of previous listing attempts and other issues could also limit its appeal to Hong Kong investors."}],[{"start":506.16999999999996,"text":""}]],"url":"https://audio.ftmailbox.cn/album/a_1753724503_8299.mp3"}