Luckin Stock Slips Despite Upsized $378 Million Follow-on Offering

Luckin Coffee has increased the number of shares and the price of the offering in a deal now worth $378 million.

Anthony Russo
    Jan 10, 2020 3:00 PM  PT
Luckin Stock Slips Despite Upsized $378 Million Follow-on Offering
author: Anthony Russo   

Shares in Luckin Coffee Inc. (Nasdaq: LK) slipped 2% to $43.32 apiece on Friday despite news of its upsized secondary offering. The beverage giant is now selling 13.8 million of its American depositary shares in a deal worth $378 million.

The Beijing-based company said in a filing with the U.S. Securities and Exchange Commission today that it is offering 9 million ADSs at $42 apiece and an additional 4.8 million ADSs held by an existing shareholder. The offering is anticipated to close on Jan. 14. 

Earlier this week, Luckin said it expected to sell 12 million ADSs, with the same 4.8 million held by an existing shareholder.

The underwriters on Luckin's offering are Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC, China International Capital Corp. Hong Kong Securities Ltd., Haitong International Securities Co. Ltd., KeyBanc Capital Markets Inc. and Needham & Company, LLC. The firms have the option to purchase up to an additional 2.07 million ADSs.

Luckin said it intends to use the proceeds for store network expansion, unmanned retail initiative, capital expenditure, research and development, sales and marketing, business development, international expansion, working capital and general administration.

The company could raise an additional $460 million from its proposed five-year notes offering, it announced earlier this week.

Since its IPO in May 2019 which raised $561 million, Luckin's stock has skyrocketed, far exceeding its issuance price of $17. After controlling just 2% of the market share in China in 2018, according to a separate report from Bloomberg, Luckin has heated up its rivalry with Starbucks Corp. (Nasdaq: SBUX).

Luckin ended 2019 operating 4,507 stores compared with Starbucks's 3,600. It also reported averaging 44 million product sales per month, serving 9.3 million consumers monthly, according to its financial reports.

Luckin's revenue in the three months through September reached $208.9 million, up 557% year-over-year. Net loss attributable to Luckin's shareholders was $74 million in the third quarter compared with a net loss of $67.8 million in the same period of the preceding year.