Luckin Coffee Files For U.S. IPO with Total Financing of $100 Million

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 main underwriters are Credit Suisse and Morgan Stanley, with the maximum financing amount of $100 million. According to Reuters, its market valuation will reach $3 billion after its financing.

Luckin Coffee store
Luckin Coffee store (Source: SEC)
Luckin Coffee Network
Luckin Coffee Network (Source: SEC)

According to the prospectus, until the end of 2018, Luckin Coffee’s net income was 840 million yuan, with a total operating cost of 2.4 billion yuan. Its net loss was 1.6 billion yuan. As of the first quarter of 2019, Luckin coffee’s net income was 470 million yuan, with a net loss of 550 million yuan. As of the end of 2018, income generated from beverages has reached 649 million yuan, accounting for 77.2 percent of the net income; in the first quarter of 2019, the company’s total income has reached 361 million yuan, accounting for 76.8 percent.

Luckin Coffee app
Luckin Coffee app (Source: SEC)

Up until March 31, 2019, the number of Luckin’s total stores has grown to 2,370, with 2,163 pick-up stores, 109 eat-in stores and 98 delivery stores.

(Source: SEC)

However, what followed after its fast expansion was the significant net losses the company has experienced since its inception in June 2017. For the three periods running from June 16, 2017 (inception date) to December 31, 2017, the year ended December 31, 2018 and the three months ended March 31, 2019, the company incurred net losses of 56.4 million yuan ($8.3 million), 1,619.2 million yuan ($241.3 million) and 551.8 million yuan ($82.2 million), respectively, primarily due to the expenses that occurred in relation to the startup and fast expansion of its business.

(Source: SEC)

As written in the prospectus, “China’s coffee market is highly underpenetrated. Inconsistent qualities, high prices and inconvenience have hampered the growth of the freshly brewed coffee market in China. We believe that our model has successfully driven the mass market coffee consumption in China by addressing these pain points. We aim to become the largest coffee network in China, in terms of number of stores, by the end of 2019.”

China's coffee market size
China’s coffee market size (Source: SEC)

Whether Luckin Coffee could still survive to compete with coffee giant like Starbucks is left to the end result of the financing.

Featured Image Source: Nikkei Asia Review