By Arasu Kannagi Basil, Pritam Biswas

(Reuters) -Chinese tea chain Chagee said on Thursday it was targeting a valuation of up to $5.1 billion in its U.S. initial public offering, braving choppy market conditions.

Market volatility stemming from uncertainty over U.S. trade policy has tempered IPO activity as companies adopt a wait-and-see approach before proceeding.    

Shanghai-based Chagee is seeking up to $411 million by offering nearly 14.7 million American depositary shares priced between $26 and $28 each.

The IPO also comes as the world's two biggest economies are locked in an escalating trade war, prolonging macroeconomic uncertainty.

While Chagee warned of some hit from the tariffs, it said "cross-border trade" was not its principal business. All of its products are manufactured in China.  

China in recent years has tightened scrutiny around firms pursuing offshore IPOs. Last year, Beijing stalled listings of several tea beverage companies worried over the poor performance of listed peers.

Chagee, which specializes in raw-leaf fresh milk tea, is the latest in a string of Chinese consumer brands to pursue offshore IPOs in recent months. 

Chinese bubble tea firms Mixue and Guming went public in Hong Kong earlier this year.

Chinese IPOs on U.S. exchanges raised $1.15 billion in 2024, compared with $469.7 million in 2023, according to data compiled by LSEG. That amount was still far below the $12.85 billion raised in 2021.

"The IPO market rarely shuts down completely, and when it does, it doesn't happen for long," said Matt Kennedy, senior strategist at Renaissance Capital, a provider of IPO-focused research and ETFs.

Cornerstone investors have indicated interest in purchasing Chagee's shares worth up to $205 million sold in the IPO.

RAPID RISE

Founded in 2017 by Junjie Zhang, Chagee opened its first store in Yunnan province and has since rapidly expanded across and beyond China. 

The tea brand generated 29.5 billion yuan ($4.03 billion) in sales last year, with over 6,000 teahouses worldwide at the end of 2024. Nearly all of its stores are set in China under a franchise scheme.

Chagee plans on serving customers across 100 countries and selling 15 billion servings annually as it aggressively expands its global reach. 

In recent years, Chagee has expanded across Southeast Asia, entering Malaysia, Singapore and Thailand. 

Chagee will list on the Nasdaq under the symbol "CHA".

Citigroup, Morgan Stanley, Deutsche Bank and CICC are the lead underwriters for the offering. 

($1 = 7.3140 Chinese yuan renminbi)