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Starbucks' China Rival Luckin Coffee Files For U.S. IPO

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Luckin Coffee Inc., Starbucks Corp.'s (SBUX) biggest rival in China, filed for an Initial Public Offering in the U.S.

In a filing with the Securities and Exchange Commission, the China-based coffee chain said it has applied for listing its American Depositary Shares or ADSs on the Nasdaq under the symbol "LK" and also set a placeholder amount of $100 million. The ADSs will represent Luckin's Class A ordinary shares.

Luckin intends to use the net proceeds from the offering and a concurrent private placement to Louis Dreyfus Company B.V. for general corporate purposes. This may include store network expansion, customer acquisition, research and development, and sales and marketing.

Credit Suisse, Morgan Stanley, CICC and Haitong International are the underwriters for the IPO.

Last week, Luckin had raised $150 million from BlackRock and other investors in a fundraising that valued the company at about $2.9 billion.

Within eighteen months, Luckin has expanded from a single trial store in Beijing to 2,370 stores in 28 cities in China as of March 31, 2019. The company had over 16.8 million of cumulative transacting customers as of March 31, 2019, while its customer repurchase rate in 2018 was over 54 percent.

Luckin is the second largest and fastest-growing coffee chain in China, according to the Frost & Sullivan Report.

Luckin operates three types of stores, but strategically focuses on pick-up stores that accounted for 91.3 percent of its total stores as of March 31, 2019. The company's outlets are cashless and customers can pay only through the Luckin mobile app.

For the three months ended March 31, Luckin reported a surge in revenues to RMB478.51 million or $71.30 million from RMB12.95 million in the year-ago quarter. Net loss for the period , however, widened to RMB551.78 million or $82.22 million from RMB132.23 million last year mainly for the expenses related to the startup and the business expansion.

However, Luckin noted that its revenues may not grow at the rate it expects and may not increase sufficiently to offset the increase in its expenses.

The company also said it may continue to incur losses in the future and cannot assure it will eventually achieve its intended profitability.

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