Chinese Coffee Co. Luckin Files For US IPO

The Starbucks rival in China, the Beijing-based Luckin Coffee, has filed for an initial public offering (IPO) in the United States with a valuation of almost $3 billion since its last funding round, according to a report by Reuters.

Luckin has set what is called a placeholder amount of $100 million to illustrate the size of the IPO, although it didn’t reveal how many shares it would offer.

The company has been expanding rapidly, and has 2,370 locations in 28 different Chinese cities. It also plans to open 2,500 new stores this year, a move that would dethrone Starbucks as China’s biggest coffee company.

Luckin’s latest funding round raised $150 million from investors that include BlackRock. However, the investment does not mean the company is profitable – it has been in the red since it started in 2017. The net loss to shareholders was $475.4 million at the end of 2018, and the company had a total revenue of $125.27 million. For the first three months of 2019, Luckin posted a net loss of $85.3 million.

Luckin has warned investors it may be some time before the company is profitable, saying that “we cannot assure you that we will eventually achieve our intended profitability.” Luckin also foresees higher expenses in the future from competition and regulation.

The company plans to continue to spend money to increase brand awareness and grow its customer base. It has invested heavily in discounts and customer deals to keep people coming to its stores.

Luckin will list under the symbol “NK” on the Nasdaq, foregoing a Hong Kong listing, because applicants for that exchange generally must have three years of financial records.

In preliminary findings, the stated size of the IPO is used to calculate the registration fees owed, which means the final size could be different.

Credit Suisse and Morgan Stanley are among the underwriters for the endeavor.

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