A Xinjiang company is hoping that its sweet desserts will charm US investors and help melt away the controversy surrounding human rights issues and the boycott of cotton grown in the autonomous Chinese region.
The patisserie chain operator Chanson International has filed for an initial public offering (IPO) on the Nasdaq market, aiming to raise up to US$22 million to expand its US operations. It has been operating the Patisserie Chanson along New York’s 23rd Street since 2017, and plans to open another in the city’s Greenwich neighbourhood in the summer. It also operates 29 outlets throughout Xinjiang under the George Chanson brand.
Chanson International is marketing its share at a maximum offer price of US$6 per share. Based on the midpoint price of US$5, the firm expects to raise US$12.9 million in net proceeds. Univest Securities is the sole underwriter of the deal.
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A US listing will help Chanson build its brand in the US, where it plans to open another 10 new stores over the next five years. By opening its books to investor scrutiny, other private firms from Xinjiang could follow in its footsteps and list overseas.
Chanson International’s IPO comes amid escalating US-China tensions on many fronts. Several multinational fashion groups such as H&M, Nike, Adidas and Burberry have stopped using cotton from Xinjiang, following a ban by the US government in January over claims of human rights violations by Beijing against ethnic Uygurs in the northwest region of China.
“We have been subject to stricter regulatory requirements in terms of entering into labour contracts with our employees and paying various statutory employee benefits,” Chanson International said in its filing on Wednesday, citing China’s labour contract law.
Apart from the labour issues, Chanson International cited the risk of terrorist attack in Xinjiang in its prospectus.
“The complex ethnic composition of Xinjiang has given rise to ethnic and other tensions both in Urumqi and elsewhere in Xinjiang,” it said. The Uygur ethnic population in Xinjiang totalled about 12.8 million, out of 24.8 million total, according to local Chinese media.
Chanson International makes the bulk of its bakery products in the regional capital Urumqi at a 10,763 square feet central factory, which is housed inside a plastic surgery hospital controlled by the chain’s chairman Li Gang and his wife. It also uses another 5,382 sq ft in the same premises which serves as it head office, occupying both spaces for free. Li will own about 86.6 per cent of the voting power of the firm after the IPO.
In New York, Patisserie Chanson has been reviewed by Vogue and The New York Times among other publications, where its European-styled restaurant serves “messy croissant” covered with chocolate ganache, organic chicken bowl for the health-conscious and cocktails like “Burgundy for Tiffany”.
British pastry chef Rory Macdonald, who told the Post that he worked at the restaurant until 2018, now serves as the group’s consultant, according to the prospectus.
Chanson International is no stranger to the effects of the pandemic, forcing it to close stores in Xinjiang. In New York, for an extended period, it was only allowed to operate delivery and pickup services due to an indoor dining ban.
For the six months ended June 2020, Chanson International posted a net loss of US$45,903 compared to a net profit of US$579,747 a year ago, according to its prospectus.
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