May 17, 2019 / 7:07 AM / 2 months ago

Starbucks' China challenger Luckin raises $561 million in U.S. IPO

NEW YORK/HONG KONG (Reuters) - Luckin Coffee Inc, the Chinese challenger to Starbucks Corp, on Thursday priced its U.S. initial public offering at the top end of its targeted range and sold more shares than planned in the biggest U.S. float by a Chinese firm this year.

FILE PHOTO: The logo is seen at a Luckin Coffee store in Beijing, China, February 28, 2019. REUTERS/Jason Lee/File Photo

The Beijing-based coffee chain raised $561 million by selling 33 million American depositary shares (ADS), more than the 30 million it originally said it would sell, at $17 each - at the top end of an indicative range of $15 to $17.

Each ADS represents eight Class A shares, the company said in a filing with the U.S. Securities and Exchange Commission last week.

The pricing values loss-making Luckin, already backed by Singapore’s sovereign wealth fund GIC Pte Ltd and U.S. money manager BlackRock Inc, at about $4.2 billion.

Luckin is due to begin trading on the Nasdaq stock exchange on Friday under the symbol “LK”.

The IPO comes as Chinese-U.S. trade tensions involving tit-for-tat tariffs rattle global financial markets. In total, Chinese firms have raised $619 million in U.S. IPOs so far this year, down sharply from $3.7 billion in the same period in 2017, Refinitiv data showed.

Luckin is the latest Chinese start-up tapping international capital markets to bolster coffers amid ever-intensifying competition with bigger rivals, notably Starbucks, at the home market.

Luckin currently 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.

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.

The brand is banking on increased coffee consumption in China, expected to rise to 15.5 billion cups by 2023 from 8.7 billion last year, according to a report cited by Luckin in its prospectus.

The company has warned it may continue to incur losses in the foreseeable future. Last year, it recorded a net loss to shareholders of $475.4 million and total revenue of $125.27 million, according to the filing. For the first three months of 2019, it posted a net loss of $85.3 million.

Credit Suisse, Morgan Stanley, CICC, Haitong International and KeyBanc Capital Markets are among the banks underwriting the IPO.

Reporting by Joshua Franklin and Harry Brumpton in New York, Julie Zhu in Hong Kong; Additional reporting by Bhargav Acharya; Editing by Peter Cooney and Leslie Adler

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