Financing

Luckin Coffee sets terms for its IPO

The company hopes to raise as much as $510 million and be valued at more than $4 billion in its upcoming offering.
Photograph: Shutterstock

Luckin Coffee’s upcoming initial public offering could take the fast-growing Chinese coffee chain from zero to about $4 billion in just two years.

The company set terms for its U.S. IPO on Monday, seeking to raise up to $510 million—far higher than the $100 million it said it planned to raise in its initial offering documents. The higher fundraise price suggests heavy demand for the fast-growing chain’s stock.

The IPO would give the company a valuation of almost $4 billion. That’s a shocking valuation for a company that didn’t exist a couple of years ago.

But it’s also a telling indication of just how much Luckin has shocked the coffee business in China in just a short time.

The chain was founded in 2017. It generated $71.3 million in net revenues in the first three months of 2019, though it also lost $82.2 million in that period as the chain spent heavily to expand its footprint of spare coffeehouses that focus mainly on digital and delivery orders.

The company operated 2,400 locations and had 17 million customers as of March 31 and also had improved its customer retention rate.

Luckin is already the second-largest coffee chain in China behind Starbucks, which operates 3,500 locations in the country and views it as a major growth market in the coming years.

Luckin uses mobile apps and a network of bare-bones stores that have few seats, don’t accept cash and are located in high-traffic areas with high demand for coffee.

The company filed for its offering in the U.S. last month.

Luckin plans to sell 30 million American depositary shares, or ADS, each of which is worth eight Class A ordinary shares of stock.

The company plans to price each ADS from $15 to $17 per share. If it sells the shares at the high point of that range, it would raise $510 million.  

Luckin plans to trade on the Nasdaq stock exchange under the ticker symbol LK.

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