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GIC-backed Luckin to raise up to US$800m in US IPO

Hong Kong/Beijing

LUCKIN COFFEE Inc, the Chinese challenger to Starbucks Corp, filed on Monday for a US initial public offering (IPO) through which, sources said, it is looking to raise up to US$800 million.

The Beijing-based coffee chain set a placeholder amount of US$100 million to indicate the size of the IPO and did not disclose the number of shares it would offer, a filing with the US Securities and Exchange Commission showed.

The coffee chain was co-founded by chief executive Qian Zhiya, the former chief operating officer of car rental firm Car Inc, and two other senior executives, and it is backed by Singapore's sovereign wealth fund GIC Pte Ltd.

Two people with direct knowledge of the matter told Reuters the startup is potentially looking to raise US$500 million to US$800 million from the listing which is scheduled to take place in May. An amount raised in that range would make Luckin the biggest US IPO by a Chinese firm so far in 2019, according to Refinitiv data.

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Another source said the loss-making company is aiming for a valuation of between US$4 billion to US$5 billion, a significant jump from US$2.9 billion following its latest fundraising of US$150 million that was announced last week. Luckin Coffee, which has been expanding at breakneck speed, currently operates 2,370 stores in 28 Chinese cities and plans to open 2,500 new stores this year with the goal of displacing Starbucks as China's largest coffee chain in the process.

The brand is banking on an increase in coffee consumption in China which, according to a report cited by Luckin in the prospectus, has almost doubled to 8.7 billion cups last year from 4.4 billion in 2013 and is expected to further rise to 15.5 billion cups by 2023.

However, the company is still loss-making and has warned that it could continue to incur losses in the foreseeable future. Since inception on June 16, 2017, the company has been in the red, with net loss to shareholders at US$475.4 million last year, and total revenue of US$125.27 million, according to the filing. REUTERS

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