Luckin raises $865 million in post-IPO offering

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luckin-coffee-2 Luckin raises $865 million in post-IPO offering News Luckin E-commerce and New Retail
A Luckin Coffee store in Beijing on Sept. 28, 2019. (Image credit: TechNode/Coco Gao)

Chinese coffee chain upstart Luckin Coffee has raked in an additional $865 million in net proceeds through two separate fundraising moves announced earlier in January, the company said on Friday, as it seeks to fund its rapid expansion throughout the country.

Why it matters: Momentum for the Chinese Starbucks challenger is on the upswing, undeterred by the timing of the new fundraise—just eight months after its US initial public offering (IPO)—highlighting risks posed by its cash-burning strategic initiatives.

  • The additional $865 million tops the company’s $651 million IPO in May 2019.
  • The company says it is the largest coffee chain in China with 4,507 stores as of end-2019, more than Starbucks’s 3,600 outlets in the country.
  • Investors have responded to Luckin’s aggressive tactics including its newly launched “smart unmanned retail” vending machines in typically compact store footprints, expansion into other consumables, and market-leading store count.

Details: The company’s share prices have shot up 42% from Jan. 8, when the cash-raising offerings and vending machine initiative were announced, closing at $50.02 on Jan. 17 at nearly triple its IPO price of $17.

  • The company received net proceeds of approximately $418.3 million from the offering which included 1.35 million American Depositary Shares offered from Luckin and 720,000 million ADS offered by a selling shareholder, sold at $42 per unit.
  • The company did not receive any proceeds from the sale of ADS by the selling shareholder, according to the statement.
  • Luckin also received approximately $446.7 million through its convertible senior notes offering, due in 2025.

Context: In addition to consolidating its foothold in coffee chain market, the Xiamen-based firm is expanding aggressively across the beverage industry by spinning off a tea brand, and striking a deal to produce fresh juices in partnership with European food processing company Louis Dreyfus.

  • The startup posted narrowed losses for the third quarter of 2019, showing an improved cost strategy.

Luckin joins Starbucks in blurring boundaries between coffee and tea