Starbucks' Chinese challenger Luckin Coffee Inc on Tuesday filed for an IPO with the U.S. Securities and Exchange Commission, aiming to raise $100 million.
There are rising doubts about the brand, which has lost money in pursuit of fast growth. Industry insiders said Luckin, which is essentially an internet company, will not be satisfied with its competition in the coffee business with rivals like Starbucks, and it may further expand into online-to-offline (O2O) businesses.
The coffee chain intends to list under the symbol "LK" on the NASDAQ, a filing with the regulator showed.
Founded in 2017, Luckin had expanded to 2,370 stores in 28 cities in China as of March 31. It sold nearly 90 million cups of coffee in 2018.
The company on Thursday secured a new round of financing worth $150 million, which brought its market valuation to $2.9 billion.
Luckin's expansion was "stunning," as it needed only two years to get to the stage of filing for an IPO, which has taken other companies about 10 years, Liu Dingding, a Beijing-based industry analyst, told the Global Times on Tuesday.
The IPO at the NASDAQ will help it fund further growth and become a driving force for the start-up to regulate its business, an industry insider surnamed Du in Shenzhen, South China's Guangdong Province, told the Global Times on Tuesday.
But its growth has been based on cash burning. Its net loss stood at nearly 1.6 billion yuan ($238 million) in 2018 and 55 million yuan in the first quarter of 2019, according to the filing.
It's a typical pattern for Chinese internet companies, including Didi Chuxing and Meituan Dianping - "spending money to buy time for development," Liu said.
"The good side is that the company can quickly respond to market trends, but such a path has also raised public doubts," Du said, adding that if the management can't get a handle on the company's growth speed, trouble lies ahead.
Luckin's competition with Starbucks in the Chinese market now mainly rests in public opinion, because it is by nature an internet company that started by selling coffee and will likely expand into more businesses, such as O2O services, according to Liu.
Lucking started selling snacks in August 2018 and began to offer more beverages such as tea in April.
It agreed with France-based Louis Dreyfus Company Asia in April to incorporate a joint venture to build and operate a coffee roasting plant in China.
"Luckin is enjoying increasing popularity as it offers various products with large discounts - I got incentives worth 30 yuan on Sunday for buying seven items during one week," a Beijing white-collar worker named Chen Chen told the Global Times on Tuesday.
