Chinese premium tea chain Nayuki had to contend with a tepid trading debut on Wednesday owing to investors' doubts over weak profitability.

The Shenzhen-based company raised HK$5.09 billion ($656 million) by selling 257.3 million shares at the top of a marketed range – HK$19.8 apiece, according to its prospectus. However, it opened slightly lower and slumped by 13.54 percent in its initial public offering (IPO) in Hong Kong.

Even with the lukewarm reception, the listing has sent Peng Xin and her husband Zhao Lin, the couple behind Nayuki, to the billionaires' club. At the closing bell, the beverage chain was valued at $3.8 billion on Wednesday. Peng and Zhao own stakes worth about $1.1 billion each.

First IPO among new-style tea makers

Founded in 2014, Nayuki, also known as Naixue's tea in Chinese, is famous for its fresh fruit and cheese topping teas, considered as new-style tea, and has gained popularity among young consumers in recent years.

As of June 18, the teahouse operator has 562 outlets around the world, according to its prospectus, and plans to use proceeds from the IPO to strengthen its supply chain and open more stores.

However, Nayuki's continued losses have prompted fears among investors. In 2020, the chain logged 203-million-yuan ($31 million) net loss. The figure stood at 40 million yuan in the previous year, according to its prospectus.

Its average daily sales per teahouse has dropped from 307,000 yuan in 2018 to 202,000 yuan in 2020, while the number for average orders fell from 716 to 470.

"There is a big problem in its [business] strategy and cost control," said Zhu Danpeng, an independent food industry analyst. He told CGTN that Nayuki's stores are too large to make profit.

"Mature companies like Starbucks have no problem with big stores, but that wouldn't work for start-ups," said Zhu, adding the large stores would brought high rent and labor costs, and increase difficulties in managements. 

Ingredients, labor and rents account for over 80 percent of the company expenditure in the last three years, its prospectus revealed.

Zhu described Nayuki's loss as "inevitable," calling the first-day debacle "as expected." 

"The new-style tea is a hot business... but how would you expect investors to buy its stocks if they can't see its future," added Zhu.