Starbucks' China challenger Luckin Coffee files for U.S. listing

A Luckin takeout order sits on a counter at a Shanghai store on Mar. 14 2019

A Luckin takeout order sits on a counter at a Shanghai store on Mar. 14 2019

Luckin has "expanded from a single trial store in Beijing to 2,730 stores in 28 cities in China" and 91.3% of their stores are pick-up locations that demand "low rental and decoration costs".

Luckin said Monday it had been boosted by huge growth in coffee consumption in the world's second-biggest economy to more than 8.7 billion cups past year, While both Starbucks and Luckin serve coffee, the similarities largely end there.

For the time being, the IPO is officially indicated by a $100 million placeholder figure, however knowledgeable sources have disclosed the actual amount sought may be more than $500 million and up to $800 million, with the company's valuation estimated at $4-5 billion, far higher than has been reflected in previous statements.

On April 23, Luckin Coffee, the Chinese Starbucks challenger, filed for official IPO to the U.S. Security Exchange Commission, with the ticker symbol "LK". The filing reports a 3,883% revenue increase between Q1 2018 and Q1 2019, but with losses more than tripling total revenue over that same period. For the first three months of the year, it posted a net loss amounting to $85.3 million.

However, the firm is still loss making. Unlike Starbucks' trademark coffee shops, most of Luckin's outlets are tiny booths in out-of-the-way spots that take orders online for both delivery and pickup.

Luckin has not said how much it plans to raise or when its initial public offering is likely to happen, but the firm has previously raised hundreds of millions dollars from big worldwide investors including Blackrock (BKCC).

Luckin said it could continue to incur losses in the foreseeable future and "we cannot assure you that we will eventually achieve our intended profitability".

If the public listing is successful, it will make the Beijing-based cafe chain the largest US IPO by a Chinese company so far this year. Coffee imports to China have grown 16% a year compared to approximately 2% in the USA, leaving room for additional players to enter the field.

It uses a variety of coupons like free coffees and discounted cups to rope in customers and get them coming back to its stores.

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