Starbucks' China challenger Luckin Coffee raises US$561m in US IPO

Luckin Coffee Inc raised US$561 million by selling 33 million American depository shares, more than the 30 million it originally said it would sell. PHOTO: REUTERS

NEW YORK (REUTERS) - Luckin Coffee Inc, the Chinese challenger to Starbucks Corp, on Thursday (May 16) priced its US initial public offering at the top end of its targeted price range and sold more shares than planned in the biggest US float by a Chinese firm this year, according to people familiar with the matter.

The Beijing-based coffee chain raised US$561 million (S$770 million) by selling 33 million American depository shares (ADS), more than the 30 million it originally said it would sell, at US$17 each, at the top end of an indicative range of US$15 to US$17.

Each ADS represents eight Class A shares, the company said in a filing with the US Securities and Exchange Commission last week.

The pricing values loss-making Luckin, already backed by Singapore's sovereign wealth fund GIC and US money manager BlackRock, at about US$4.2 billion.

A spokesman for Luckin declined to comment. The people declined to be identified as the information was not yet public.

Luckin is due to begin trading on the Nasdaq stock exchange on Friday under the symbol "LK".

The IPO comes as Chinese-US trade tensions involving tit-for-tat tariffs rattle global financial markets. In total, Chinese firms have raised US$619 million in US IPOs so far this year, down sharply from US$3.7 billion in the same period in 2017, Refinitiv data showed.

Luckin is the latest Chinese start-up tapping international capital markets to bolster coffers amid ever-intensifying competition with bigger rivals, notably Starbucks, at the home market.

Luckin currently operates 2,370 stores across China and plans to open 2,500 more this year with the goal of displacing Starbucks as China's largest coffee chain.

The coffee chain, co-founded in June 2017 by Chief Executive Qian Zhiya, plans to primarily use the IPO proceeds for store network expansion, customer acquisition, marketing, research and development.

The brand is banking on increased coffee consumption in China, expected to rise to 15.5 billion cups by 2023 from 8.7 billion last year, according to a report cited by Luckin in its prospectus.

The company has warned it may continue to incur losses in the foreseeable future. Last year, it recorded a net loss to shareholders of US$475.4 million and total revenue of US$125.27 million, according to the filing. For the first three months of 2019, it posted a net loss of US$85.3 million.

Credit Suisse, Morgan Stanley, CICC, Haitong International and KeyBanc Capital Markets are among the banks underwriting the IPO.

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