On October 18, 2023, shares of Chagee, a prominent Chinese tea chain, surged 15% during its highly-anticipated debut on the public market. This comes as the company sets its sights on launching its first U.S. store, navigating complex U.S.-China trade dynamics.

Trading under the ticker symbol “CHA” on Nasdaq, Chagee opened at $33.75 per share. Initially, the stock saw a remarkable increase of nearly 49%, although it experienced a pullback in the afternoon, closing the day more subdued.

Chagee had priced its initial public offering (IPO) at $28 per share the previous day, falling at the upper end of the anticipated price range of $26 to $28. With the sale of 14.7 million shares, the IPO raised approximately $411 million, valuing the company at about $5 billion.

Founded in 2017, Chagee has swiftly expanded its footprint, boasting over 6,400 tea houses across several countries, including China, Malaysia, Singapore, and Thailand. In the last fiscal year, the company reported a net income of $344.5 million on revenues of $1.7 billion, highlighting its robust business model and rising popularity in the beverage sector.

Chagee aims to make a significant entrance into the American market, with plans to open its first U.S. location at Westfield Century City mall in Los Angeles later this spring. The chain’s founder and CEO, Junjie Zhang, started the company inspired by the success of global coffee brands, positioning Chagee as a direct competitor in the growing beverage market.

Notably, China serves as Starbucks’ second-largest market, illustrating the strong potential for tea brands to thrive similarly in the coffee-dominated U.S. landscape.

Chagee’s IPO arrives amidst a period of uncertainty in financial markets, particularly following previous actions by former President Donald Trump that instigated a trade war marked by new tariffs between the U.S. and China. The market environment has led several companies, including Klarna and StubHub, to postpone their IPOs in recent weeks as investor sentiments waver.

Additionally, there is a declining trend in Chinese companies opting to list on U.S. exchanges. Between January 2023 and January 2024, the number of these companies listed on the three largest U.S. exchanges decreased by 5%, as reported by the U.S.-China Economic and Security Review Commission.

As Chagee steps into the American market and navigates the complexities of its international expansion, all eyes will be on how the company capitalizes on the tea trend in the U.S. and responds to the shifting market landscape.