Luckin Coffee Seeks More Of China Market, Launches Equity Deals Worth $821m

By Dave Simpson
Luckin Coffee Seeks More Of China Market, Launches Equity Deals Worth $821m

Luckin Coffee Inc has said that it is expanding into vending machines that sell freshly brewed hot beverages and snacks, seeking even more of the China market after overtaking Starbucks Corp as the country's biggest coffee chain by number of stores.

Luckin founder and CEO Qian Zhiya said that the new strategy allows it to be asset-light and nimble. "It allows us to get closer to consumers and we are not restricted by the license approvals," she said at an event to launch the new business.

The three-year-old startup also launched a share placement and a convertible bond worth a combined $821 million, according to two term sheets seen by Reuters.

Nasdaq-listed Luckin is selling 12 million American depository shares (ADSs) including 4.8 million secondary ones from Chinese private equity firm Centurium Capital. The deal could raise approximately $421 million before any over-allotment option is exercised.

Centurium, an early backer of Luckin, is selling about 20% of its holdings and will remain the largest intuitional shareholder in the company after the deal.


Luckin is also raising another $400 million from a five-year convertible bond, carrying a coupon of between 0.5% and 1% with a conversion premium of between 27.5% and 32.5%, one of the term sheets showed.

The company plans to use part of the proceeds to open more stores and for sales and marketing.

Growing at breakneck speed by offering cheap delivery, online ordering and big discounts, Luckin also said that it now has just over 4,500 stores across China - achieving a goal that it set one year ago and topping Starbucks which has 4,100.

Luckin showcased two vending machines at the event - one featuring a Swiss Schaerer coffee machine that can make a variety of hot and iced drinks, as well as one offering a range of snacks.

Market Value And Net Loss

The startup, also backed by Singapore sovereign wealth fund GIC, went public last year and has a market value of $8.4 billion. Starbucks has a market value of $104 billion.


Luckin made a net loss attributable to shareholders of about 532 million yuan ($76 million) in the third quarter of 2019, compared with a 484.9 million yuan loss in the same period a year earlier. It has also said that it is looking to expand overseas.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.