Luckin Aims To Raise $586.5M With IPO

Chinese coffee company Luckin, a fast-growing startup that aims to replace Starbucks as China’s largest coffee giant, is looking to raise $586.5 million ahead of its IPO, according to a report from Reuters.

The company said it will offer 34.5 million American depository shares (ADS) that will be priced between $15 and $17 per ADS in the IPO, which would give the company a valuation of between $3.48 and $3.95 billion.

Every ADS represents eight Class A shares, the company said in its F-1 filing. The company currently has 2,370 stores in 28 cities throughout China, and plans to open 2,500 this year alone.

Luckin’s business model is based on the bet that Chinese customers will increasingly consume more coffee. Consumption of the product in the country has almost doubled, to 8.7 billion cups last year from 4.4 billion in 2013. It is expected to rise to 15.5 billion cups by 2023.

The company has also recently been offering more than just coffee, including products like grapefruit, cheese, jasmine tea and Sichuan cold noodles with pulled chicken.

Luckin was founded in 2017 and does not operate under a profit; the company warned it will continue to lose money for a while.

According to the filing, the company had a $475.4 million net loss to shareholders and a total revenue of $125.27 million. For the first quarter of this year, it saw a net loss of $85.3 million. The company attracts customers with a number of discounts, which affects the company’s bottom line.

Qian Zhiya, the former CEO of car rental company Car Inc., along with two other senior executives, founded the coffee company, which is backed by Singapore’s sovereign wealth fund, GIC Private Limited. Other investors in the company include Chinese investment firm Centurium Capital and Joy Capital, along with U.S. money manager BlackRock.

Starbucks CEO Kevin Johnson recently said he doesn’t think the use of discounts to attract customers is viable. “Some of those competitors are competing through heavy, heavy discounts that we don’t believe are sustainable,” he stated.