Luckin Coffee tops USD 4 billion valuation in US IPO

The fresh funds will boost Luckin’s ambitions to surpass Starbucks in China.

Fast-growing coffee chain Luckin Coffee has raised USD 561 million (RMB 3.87 billion) in its IPO at a roughly USD 4 billion (RMB 27.6 billion) valuation, Financial Times reports.

The company sold 33 million American Depositary Shares at a USD 17-per-share-price, and an additional USD 10.2 million worth of shares to agricultural commodities supplier Louis Dreyfus, with whom it is forming a joint venture on a coffee roasting plant in China.

Luckin’s current valuation is a sharp increase from its previous value of USD 2.9 billion (RMB 20.1 billion) during its last private funding round in April when it raised USD 150 million (RMB 1 billion).

The fresh funds will boost Luckin’s ambitions to surpass Starbucks in China. Luckin had 2,370 stores in 28 cities in China at the end of March, with almost 17 million customers, and sold 90 million cups of coffee in 2018. This makes it “China’s second-largest and fastest-growing coffee network, in terms of number of stores and cups of coffee,” according to Frost & Sullivan. It has more tech in its DNA than Starbucks. Luckin, for example, is completely cashless and you have to order via app even if you pick up the cup at a store.

Starbucks currently operates over 3,700 stores in over 158 Chinese cities.

Luckin’s expansion has accompanied a surge in revenue and, unsurprisingly, even larger losses. Revenue reached RMB 840.7 million (USD 125.3 million) in 2018, with losses of RMB 1.6 billion (USD 230 million).

In Q1 2019, the company’s net revenue was RMB 478.5 million (USD 69.2 million), with RMB 551.8 million (USD 79.8 million) in losses.