Luckin Coffee, the Starbucks of China, goes public in NY

REUTERS  Jason Lee

REUTERS Jason Lee

Is it latest money-losing company to make its trading debut on United States markets.

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

The company's American depositary shares (ADS) priced at the top of their range, at $17 to be exact, allowing Luckin to sell 10% more shares than its original plan due to strong demand, a source with direct knowledge of the deal told Caixin.

The coffee chain sold 33 million shares at $17 apiece on Thursday evening, raising $571.2 million and giving it a valuation of more than $3.9 billion.

Luckin Coffee, the supersonic Chinese chain, surged more than 20% during its USA initial public offering on Friday.

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.

Luckin now 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. During the first quarter of this year, it recorded a loss of $85 million on $71 million in sales, according to TechCrunch. Starbucks has more than 3,600 stores in the country. It's aiming to have 6,000 sites in China by 2023.

Luckin, with a focus on convenience and affordability, is seeking to lure urban office workers who don't need the big plush spaces offered by Starbucks.

Luckin's outlets are cashless and designed for fast pick-up as well as delivery, with an app that rushes out deliveries in about 18 minutes. The company has a partnership with internet giant Tencent Holdings Ltd. Starbucks only launched delivery in August, under a partnership with Alibaba Group Holding Ltd.

Chasing the entrenched rival has been costly. Luckin said it's burning through $130 million a year and may continue to see losses in the future.

The company posted a $475 million loss a year ago on $125 million in revenue.

Credit Suisse, Morgan Stanley, China International Capital Corporation Hong Kong Securities Limited (CICC) and Haitong International are leading Luckin's initial public offering.

Luckin Coffee started trading on the Nasdaq on Friday morning at $17 per share.

-With assistance from Crystal Tse.