Miniso's Stock Tumbles 39% on Ambitious Yonghui Acquisition Amid Market Challenges

Shares of Miniso Group Holding (NYSE: MNSO) experienced a dramatic decrease, dropping as much as 39.2% to HK$20 ($2.57) on Tuesday. This plunge followed Miniso's announcement of its intention to acquire a significant stake in Yonghui Superstores, a supermarket chain facing financial difficulties.

The lifestyle retailer's stock not only reached its lowest price since December 2022 but also marked its most substantial one-day percentage loss since its market debut in July 2022. By the end of trading, the stock settled at HK$25.05, reflecting a 23.9% decline—its lowest closing price since January 2023. Miniso's fall stood in stark contrast to the broader market, with the Hang Seng Index experiencing a 4.1% uptick during the same period.

The U.S.-listed shares of Miniso also felt the heat, declining by 16.6% on Monday in response to the news. The company's ambitious move involves acquiring a 29.4% stake in Yonghui for approximately 6.3 billion yuan ($893.1 million). In this transaction, Miniso will purchase shares from affiliates of Singapore-listed DFI Retail Group and Chinese e-commerce giant JD.com (NASDAQ: JD) at a price of 2.35 yuan ($0.33) per share, reflecting a 3.1% premium over Yonghui's closing price on September 20.

However, analysts from Nomura, who retain a "buy" rating on Miniso, expressed concerns over the acquisition. They suggested that the decision to invest in Yonghui brings with it significant uncertainties, particularly as there seems to be no immediate financial synergy between the two companies. They questioned whether this bold strategy might be excessively ambitious given Yonghui's recent performance.

Interestingly, Yonghui's shares, listed on the Shanghai exchange, saw a reversal of fortunes, rising by 10.2% to 2.48 yuan, the highest level achieved since August 12. This uptick may be attributed to market speculation about the implications of Miniso's investment.

In a research note, CMB International raised eyebrows regarding the timing and scale of Miniso's investment. The firm highlighted concerns about the financial viability of using over 95% of Miniso's cash reserves to acquire an asset that has not turned a profit in the last three years.