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The Hong Kong Securities and Futures Commission announced that CHABAIDAO (02555.HK)'s IPO two years ago may have been artificially manipulated. On October 13, trading in CHABAIDAO (02555.HK) shares on the Hong Kong Stock Exchange was suddenly suspended. According to an exchange announcement, the suspension was directed by the Hong Kong Securities and Futures Commission (the "SFC") and executed by the Hong Kong Stock Exchange. That afternoon, the SFC issued an announcement stating that "the initial public offering of CHABAIDAO may have been artificially manipulated, with the intention of creating an untrue appearance of demand for CHABAIDAO shares. While the SFC continues its investigation, suspending trading in CHABAIDAO shares is necessary or appropriate to maintain an orderly and fair market for the stock and to protect the interests of the investing public." The announcement also named a "suspicious group" behind CHABAIDAO and another Hong Kong-listed company, Cloudbreak Pharma, which is suspected of participating in fraudulent schemes related to the initial public offerings (IPOs) of these two companies. As of press time, CHABAIDAO had made no public response to the matter. The Hong Kong Stock Exchange replied that it does not comment on individual cases.

CHABAIDAO is a chain tea beverage company founded in 2008. As of the end of June 2026, CHABAIDAO had 8,863 stores globally. It is a typical "franchise-model supply chain company," whose core profit does not come from franchise fees but from selling raw materials, packaging materials and equipment to franchise stores, a segment that has long accounted for around 95% of total revenue. More than two years have passed since CHABAIDAO's IPO. On April 23, 2024, CHABAIDAO listed at HK$17.5 per share, raising a total of HK$2.586 billion. CHABAIDAO also became the second listed new-style tea beverage company after Nayuki. However, CHABAIDAO's share price fell below its issue price on the first day of listing, dropping nearly 39% at one point during the session. CHABAIDAO's listing process took eight months. On August 15, 2023, the company first submitted its prospectus to the Hong Kong Stock Exchange, during which the prospectus lapsed once, and it finally launched its offering on April 15, 2024, officially listing on April 23, with CICC as the sole sponsor of the IPO. On the last trading day before the suspension (October 12, 2026), CHABAIDAO closed at HK$4.035, with a total market value of approximately HK$5.96 billion. At present, CHABAIDAO's share price has fallen about 77% from its issue price of HK$17.5.

"The SFC's allegation is mainly IPO manipulation, artificially creating IPO hype through false subscriptions and other means, causing retail investors to be deceived," Shen Meng, founder of Chanson Capital, explained. "This allegation is very serious, so a mandatory suspension is necessary to avoid major volatility." According to Shen Meng's understanding, the stock involved will remain suspended throughout the investigation unless the information is already sufficiently transparent and there is nothing further that needs to be disclosed.

Performance and share price under pressure after listing

According to CHABAIDAO's prospectus and financial reports, from 2021 to 2023, the company relied on rapid store expansion, with revenue growing from 3.644 billion yuan to 5.704 billion yuan and net profit rising from 776 million yuan to 1.151 billion yuan, a compound annual growth rate of 21.6%. In 2023, CHABAIDAO's performance reached a stage high, with its store scale entering the second tier of domestic tea beverage brands, ranking behind Mixue Bingcheng and Guming. In the past two years, the domestic tea beverage industry has entered a stage of stock competition, the dividend from rapid store expansion has faded, and leading brands have been fiercely competing, vying for store locations in lower-tier markets while increasing investment in new categories such as coffee and fruit tea, seeking to seize share through supply chains and franchise policies. Differentiation in the tea beverage industry has intensified, and growth pressure has generally risen. As the price war sweeps the industry, brands such as Heytea and Nayuki continue to move downmarket, and combined with pressure from Guming and Shanghai Auntie in the same price band, CHABAIDAO's expansion and profitability are under pressure. In 2024, the company's performance retreated significantly, with revenue falling to 4.917 billion yuan, down 13.8% year on year, and net profit attributable to shareholders of 472 million yuan, down 58.6% year on year. In 2025, revenue rebounded to 5.395 billion yuan and net profit attributable to shareholders was 805 million yuan, a partial recovery, but profitability has not yet returned to the peak level before listing. In the first half of 2026, the company's revenue was 2.655 billion yuan, up 6.2% year on year; net profit attributable to shareholders was 336 million yuan, up 3.2% year on year, while the gross margin fell to 30%. Its revenue from royalties and franchise fees decreased 19.5% year on year. This is related to the loss of franchisees. Financial reports show that in the first six months of this year, CHABAIDAO terminated cooperation with 497 franchisees, after losing 1,218 franchisees last year.

The tea beverage industry has previously seen companies pay a heavy price for fraud. In 2020, Luckin Coffee was exposed for financial fraud and was delisted by Nasdaq in July of the same year. In December 2020, Luckin agreed to pay US$180 million in civil penalties to settle with the SEC. Chinese regulators also launched investigations into Luckin's domestic operating entity, relevant responsible persons and third parties that assisted the fraud, and advanced penalties in accordance with the law. However, what was falsified in the Luckin case was the company's operating data, whereas what is being investigated in CHABAIDAO's case is whether the IPO subscription demand was genuine; the reasons involved differ. Enforcement against IPO fraud in Hong Kong's capital market has strengthened significantly in recent years, with several landmark cases. The 2010 Hongliang International case was the first IPO fraud buyback and delisting case in Hong Kong stocks. The company was suspended just three months after listing, and its prospectus was characterized by the SFC as "containing serious false or misleading information." In the end, Hongliang International bought back shares from public shareholders in full at the issue price and delisted, and its sponsor Mega Capital was stripped of its license and fined HK$42 million — equivalent to all the revenue it earned from the project as sponsor. The 2024 ruling in the Ching Lee Holdings manipulation case escalated penalties from administrative to criminal. In that case, the manipulation ring took up placing shares through 156 connected accounts, and the mastermind was sentenced to 4 to 6 years and 8 months in prison, setting the highest sentencing record for a market manipulation case in Hong Kong stocks.

The "suspicious group" behind CHABAIDAO

In its October 13 announcement, the SFC specifically named the "suspicious group" behind CHABAIDAO, issuing restriction notices to six brokerage firms prohibiting them from disposing of or dealing with assets related to Sun Ran and eight affiliated companies connected to the "group," involving account assets of HK$4.379 billion. The SFC disclosed that Sun Ran is a licensed representative of Harvest Global Investments Limited. The company has a similar name to Harvest Global Asset Management under the mainland public fund house Harvest Fund, but Harvest Global Asset Management has clarified on its official website that the two are not related in any way. This "suspicious group"'s fraudulent scheme also involved another company — Cloudbreak Pharma. This is an ophthalmic innovative drug company that went through the 18A channel, filed four times, and listed on July 3, 2025, with CCB International and Huatai International as joint sponsors, an issue price of HK$10.1, and total fundraising of HK$612 million. Cloudbreak Pharma's IPO data showed an obvious mismatch between hot and cold. Its Hong Kong public offering was 78.78 times oversubscribed, with a one-lot allotment rate of only 5%, but the international placing was only 0.89 times subscribed and was not fully covered. It closed down 38.61% on its first day of listing. Before the suspension it traded at HK$1.19, a cumulative decline of 88% from the issue price, with market value shrinking to about HK$1.1 billion.

The reason these two IPOs were brought into the same investigative scope is closely tied to the SFC's continued tightening of regulation. In May 2021, the SFC and the Hong Kong Stock Exchange issued a "Joint Statement on Misconduct in Initial Public Offerings," mentioning the phenomenon of "ramp-and-dump" in recent Hong Kong IPO projects. This is a stock market manipulation technique in which fraudsters use various methods to artificially push up the share price of a listed company, luring unsuspecting investors to buy at high prices the shares the fraudsters are dumping. The share prices of such stocks often surge in the early days after listing and then fall sharply below the issue price, with trading volume usually shrinking to negligible levels afterward. The statement mentioned that in some IPO projects with the above problems, underwriters would be paid unusually high commissions, with the most extreme cases paying 20% of the fundraising amount to underwriters. According to public information, when CHABAIDAO listed, its listing expenses were HK$120 million, with brokerage commissions accounting for 1% of the funds raised. The statement said that if listing documents appear likely to contain false, incomplete or misleading information, the SFC and the Stock Exchange will investigate the parties involved and take appropriate action under the Securities and Futures Ordinance, the Securities Market Listing Rules or the Listing Rules. In addition to the Stock Exchange's regulatory work on listed issuers under the Listing Rules, the SFC will also not hesitate to exercise its statutory powers (including investigative powers) against issuers, directors, substantial shareholders and intermediaries suspected of participating in misconduct. The SFC also clearly stated in its announcement on CHABAIDAO that the parties involved may later be ordered to compensate affected investors through restitution proceedings. This means that if the investigation ultimately confirms IPO fraud, the follow-up in the CHABAIDAO case may move in two directions: first, criminal prosecution of relevant persons, and second, seeking financial compensation for investors who bought in the secondary market through restitution proceedings.

Earlier, on January 30, 2026, the SFC issued a circular expressing high concern about problems arising during the surge in new listing applications in 2025, including serious deficiencies in the preparation of listing documents, negligent conduct by sponsors and serious failures in resource management. On October 13, the SFC disclosed that from January to September, a total of 65 listing applications were suspended from processing. In its October 13 announcement, the SFC also mentioned a second "suspicious group." This "group" is suspected of participating in a fraudulent scheme related to the IPO of Tianju Dihe (Suzhou) Technology Co., Ltd. (Tianju Dihe). Liu Haoran behind it, along with two other entities, was also restricted from disposing of assets, with funds amounting to HK$285 million. Liu Haoran is relatively active in Hong Kong's capital market and is currently an executive director and China head of Ruikai Group. Ruikai Group has participated as a cornerstone investor in multiple Hong Kong IPOs. Public information shows that Ruikai Group placed an order of HK$55 million in the IPO of Flowing Cloud and introduced SenseTime as a cornerstone investor; it placed an order of HK$25 million in the IPO of Lianxiong Technology and also participated in projects such as YSB, MedSci Health and Green Bamboo Biological. Liu Haoran also participated in Dexiang Real Estate's transformation toward AI (artificial intelligence). On October 13, Dexiang New Cloud Computing Power fell more than 40%.

The suspected common mechanism in the two cases is that part of the IPO proceeds may have been diverted under undisclosed agreements between listed companies and these groups for so-called financial product investments, which may have prompted IPO funds to secretly flow back to major placees or their connected persons. SFC Chief Executive Officer Liang Fengyi said that market integrity and stability are the cornerstone of maintaining a fair capital market and the confidence of genuine investors, and that there is a zero-tolerance policy toward any form of manipulation of initial public offerings, price manipulation or creation of a false market.