Luckin Coffee Files For U.S. Listing

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Today, the Chinese challenger to Starbucks Corp, Luckin Coffee Inc, filed for an initial public offering with the Securities and Exchange Commission of the United States of America, after being valued at almost $3 billion (2.3 billion pounds) in its latest round of funding.

The coffee chain is based in Beijing. A filing with the US regulator revealed that it set a placeholder amount of $100 million to indicate the size of the IPO, however, it did not disclose the number of shares that it would offer.

Expanding at breakneck speed, Luckin Coffee currently operates 2,370 stores in 28 cities across China. It is also planning to open 2,500 new stores this year – displacing Starbucks as the largest coffee chain in China in the process.

The brand is banking on a rise in the consumption of coffee in the country which, according to a report that was cited by the Luckin in the prospectus, has increased from 4.4 billion cups pr year in 2013 to 8.7 billion in 2018, with an anticipation that it will continue to rise to 15.5 billion cups per year by 2023.

In its most recent round of funding, Luckin was able to raise $150 million from investors including BlackRock Inc, valuing the company at $2.9 billion.

However, the firm is still loss making.

According to the filing, the firm has been in the red since its inception on June 16, 2017, with net loss to shareholders amounting to $475.4 million in the year ended December 31, 2018, and total revenue amounting to $125.27 million. For the first three months of the year, it posted a net loss amounting to $85.3 million.

Luckin said that it would continue to spend on expanding its customer base and store network, and increasing its brand awareness. It will also invest heavily in offering discounts and deals to keep bringing in more customers through its doors.

However, it warned that revenues may not grow at the rate that it expects that would offset higher expenses in the near future because of changes in regulation and increasing competition.