Shares in Chinese coffee company Luckin Coffee surged about 50 percent in the company’s debut on the Nasdaq on Friday (May 17), according to a report by CNBC.
The opening trade for the company, which was under the symbol LK, was $25 a share. Luckin priced its initial public offering (IPO) at $17 a share on Thursday night, for an implied value of around $4 billion.
The company also added 3 million more shares than originally planned, to 33 million. It set its price at the high range of between the expected $15 to $17 a share.
By early afternoon on Friday it was up 27 percent to $21.66.
Luckin was founded less than two years ago and wants to dethrone Starbucks, which recently celebrated a 20-year anniversary in the country, as the biggest coffee company in China.
It’s expanded at breakneck speed, opening 2,370 stores with plans to open 2,500 by the end of 2019. About 90 percent of its stores are little shops designed for quick and easy pickup, that are close to customers.
“We have done what most people do in 15 or 20 years,” Luckin CFO Reinout Schakel said.
Coffee sales in China are expected to continue to grow, and analysts say they could reach $8.2 billion this year and grow annually by 11.3 percent for the next five.
However, tea is still China’s go-to beverage, so Luckin is trying to reach that market as well by offering trendy tea beverages like fruit teas topped with cream cheese.
Another method used by Luckin, which is part of the reason it burns through cash so quickly, is that it attracts new customers by discounting its beverages, a move that Starbucks CEO Kevin Johnson has said is untenable.
The company reported net sales of $125.3 million against a net loss of $241.3 million in 2018, and shareholders will want to see the company raise a profit eventually. The $561 raised through the IPO will go toward funding new stores, customer acquisition, investments in technology and other corporate uses.