Should Starbucks be anxious about Luckin Coffee IPO?

Should Starbucks be anxious about Luckin Coffee IPO?

The company raised around $561 million after pricing its offering at the top of the anticipated price range, giving it a market value of $4.2 billion, in the biggest USA float by a Chinese firm this year. The company priced its IPO at the top of the projected price range at $17 a share. The stock finished its first day at $20.38. "We have done what most people do in 15 or 20 years". All purchases from the chain must be done using the company's app.

Luckin plans to open 2,500 stores this year and unseat Starbucks as China's largest coffee chain.

Johnson, who took the reins in spring of 2017, told CNBC that Luckin's claim is "unlikely", noting his company's 18 percent growth in new China stores as of the fourth quarter of 2018.

Joele Frank, Wilkinson Brimmer Katcher and ICR Inc. handled the high-profile IPO of China's Luckin Coffee, which began trading today on the NASDAQ with an initial market valuation of about $4B. Users have been attracted to Luckin for its aggressive marketing campaign on WeChat, the prevalent social media in China, and promotions like "Buy 5 and Get 5" and 92%-off coupons.

Luckin, founded in 2017, generated $71.3 million in net revenues during the first three months of the year but lost $82.2 million as the company spent heavily to expand its footprint and lure customers.

The brand is banking on increased coffee consumption in China, expected to rise to 15.5 billion cups by 2023 from 8.7 billion a year ago, according to a report cited by Luckin in its prospectus. KeyBanc Capital Markets Inc. and Needham & Company, LLC are acting as co-managers. The shares closed up 20 per cent at US$20.38, valuing the company at US$4.8 billion. One investor said he stayed away from Luckin's shares out of concerns over its heavy spending and unforeseeable profitability. He said Luckin will continue to subsidize customers to win more buyers.

Each ADS represents eight Class A shares, Luckin Coffee said in a filing with the US Securities and Exchange Commission last week. "It must seize the opportunity to launch the IPO and set up its competitiveness", said a person close to Luckin's management.

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