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China's Luckin Coffee Turns to U.S. for $300 Million IPO

Since its founding in October 2017 and its official launch just a year ago, the company has expanded at breakneck speed.

Selina Cheng
    Feb 01, 2019 12:23 PM  PT
China's Luckin Coffee Turns to U.S. for $300 Million IPO

China's fast-growing coffee chain Luckin Coffee has decided to pull back from preparations for its float in Hong Kong and is now targeting a $300 million initial public offering in the U.S. market, according to a new report by Bloomberg News. 

So far, the company is working with Credit Suisse Group AG on the deal, and more banks will join the team in a later stage, the news service said. The IPO could take place as soon as the second quarter, according to a source. 

The Chinese up-and-coming coffee chain is young and ambitious. Since its founding in October 2017 and its official launch just a year ago, the company has expanded at breakneck speed. 

Just a month ago, the company announced that it raised $200 million in its latest funding round led by investors, including Singapore sovereign wealth fund GIC Pte Ltd. and China International Capital Corp Ltd. (HKEX: 3908), bringing the company's valuation up to $2.2 billion.

With the new funding, the company said it plans to open 2,500 locations this year in addition to the 2,000 stores it currently has. That would surpass the industry leader Starbucks' current 3,600 stores in the country, where it's been operating in China for 20 years. Last May, the company issued a letter claiming Startbucks had unfairly monopolized the market in China by putting pressure on suppliers not to work with other brands, obtaining exclusivity rights with property owners, etc. 

"What we want at the moment is scale and speed," Luckin's chief marketing officer, Fei Yang, said at a presentation in Beijing earlier this month.

Luckin's rise has not come cheaply. It is luring customers with WeChat coupons, free delivery, loyalty bonuses, etc. It recorded a loss of $128.6 million for the first three quarters last year, which Yang said was in line with expectations as the company pushed to expand.

For the full year 2018, the company has estimated revenue of $114.5 million while targeting sales of $2.8 billion in 2021, according to Equal Ocean.

In addition, the company highlights itself as techonology-savvy. Luckin doesn't accept cash. Instead, customers can only pay through the Luckin app, which includes a livestream of coffee being prepared. Customers can have coffee delivered to their door in an average of 18 minutes.

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