Starbucks rival Luckin Coffee aims to raise up to $586.5M in IPO

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Beijing-based chain Luckin Coffee on Monday disclosed that it would seek to raise up to $586.5 million in its upcoming initial public offering as it looks to challenge rival Starbucks’ dominance in China.

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Luckin, which currently ranks as China’s second-largest coffeehouse chain, said it will offer 34.5 million American depositary shares priced at between $15 and $17, according to an SEC filing. The company will trade on the Nasdaq Global Select Market under the ticker “LK.” Luckin filed to go public last month.

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The company already operates 2,370 store locations in China. The filing detailed plans to open an additional 2,500 stores in the country by the end of 2019, surpassing Starbucks, which operates more than 3,700 stores.

“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,” the company said in its S-1 filing. “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.”

Luckin has grown rapidly in recent years even as Starbucks contends with slowing growth in China. Starbucks CFO Patrick Grismer said in December that the company expects same-store sales growth of between 1 percent and 3 percent over the long-term, a pace which would trail expectations in other key regions.

Luckin’s business plan calls for an emphasis on mobile technology, streamlined store experiences and menu discounts to lure new customers. The company is not profitable and has incurred steady losses since its mid-2017 launch, including a net loss of $85.3 million in the first three months of this year alone.

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“We intend to further increase our brand awareness, expand our customer base and store network, and expect to continue to invest heavily in offering discounts and deals and other aspects of our business, especially sales and marketing expenses, in the foreseeable future as we continue to expand our store network and our product offerings,” the company said, adding that it “cannot assure” investors that it will reach its profitability goals.

This story has been updated.

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