Luckin Coffee

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China's Starbucks Challenger Files for U.S. IPO
> Luckin applies to list on Nasdaq under the ticker symbol LK
> Firm seeks to unseat Starbucks as China’s biggest coffee chain
By Yueqi Yang
April 23, 2019, 3:15 AM GMT+7 Updated on April 23, 2019, 9:47 AM GMT+7

Luckin Coffee Inc., the ambitious startup that is challenging Starbucks Corp. in the race to dominate China’s growing coffee culture, filed for a U.S. initial public offering.

The Beijing-based company applied to list American depositary shares on Nasdaq under the ticker LK. The coffee unicorn is said to plan to raise around $300 million in the IPO, Bloomberg News reported in February. Last week, Luckin raised $150 million from BlackRock and other investors at a valuation of $2.9 billion.

Luckin is spending millions of dollars a year opening outlets to unseat Starbucks as China’s top coffee company. Since its inception in June 2017, Luckin has quickly expanded into 2,370 stores in 28 cities, with backing from investors including Singapore sovereign wealth fund GIC Pte and China International Capital Corp. By the end of this year, Luckin aims to become the largest coffee network in China in terms of number of stores.

It faces an uphill battle against Starbucks, which entered China 20 years ago and dominates with more than 50 percent of the market last year, according to Euromonitor. Luckin held only a 2.1 percent share in 2018. Starbucks has more than 3,700 outlets in the country and is also expanding at break-neck speed, opening a new store roughly every 15 hours. It’s aiming to have 6,000 sites in China by 2023.

China may become an increasingly important market for coffee retailers due to the country’s low per-capita consumption of the beverage and rising middle-class affluence, Bloomberg Intelligence analysts wrote in January. Coffee consumption is estimated to grow by roughly 3 percent a year through 2023, according to Euromonitor.

Luckin, with a focus on convenience and affordability, is seeking to lure urban office workers who don’t need the big plush spaces offered by Starbucks. Many customers are initially attracted to the coffee chain by its free vouchers, and the company plans to keep investing heavily in discounts and deals.

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Specuvestor: Asset - Business - Structure.
Coffee is indeed addictive and has an edge over other drinks. And it is definitely better to expand the market together with your competitors

7 Things Everyone Is Getting Wrong About the Luckin IPO (Pt 1 of 2)

Overall, I didn’t see any real surprises in strategy or execution. And based on that, here are seven things I think people are getting wrong about Luckin and its IPO.
The short report could be found over here:

It is 89 pages long (half of them are images/tables supporting their conclusions). Takes some time to read through, but i thought it is several times more instructive than some "Master XXX Class" touted locally. And yeah, the former is free while the latter needs to pay a few hundred bucks. The former can be summarized as "Luckin is the real badass nationalistic company for using foreign money to subsidize local consumers". The 3rd portion (debunking Luckin's business model/future growth plans) of the read also help one to understand a little bit of the coffee/tea retail industry.

Luckin Coffee apologises for alleged fraud

Luckin Coffee on Sunday apologised and pledged to strengthen controls after an internal investigation found hundreds of millions of dollars of alleged fake sales last year, wiping about 75 per cent off the company’s market value.
Good share. A very well-written report.

It debunks not only the integrity of its financials, but also demonstrate the less flattering history of the majority shareholders, and the weakness of its business model. Plenty of good stuff to pick up.

Some of the points mentioned by the article in post #2 are also congruent with the short report.

GIC must be quite displeased with this.
Luckin Coffee lenders seek to sell over 76 million shares after chairman defaults on loan
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US investors financing further deflation in China. Latest gimmick by Luckin.

Quote:Luckin Coffee’s app has rocketed to become the second most popular in China as consumers rushed to claim a free drink that it has long offered for downloading, worried the chain might collapse after it said much of its sales last year were fabricated.

“I heard that if you download the app, you will get free coffee,” said Beijing-based Gan Lin, 35, who downloaded the app on Friday.

“I’m not that into coffee but it would be a pity to lose the chance for a free drink. After all, you don’t know how much longer Luckin can hold on.”

It has relied heavily on discounted sales to drive its fast growth and capture market share. The loss-making company began operations in January 2018 and by December 2019, had over 4,500 stores - overtaking Starbucks, with 4,100, in the process.

Chanos, Carson Block and their buddies would have less short candidates if Nasdaq tighten their listing rules for foreign firms.

It is part of Nasdaq's cycle where companies (especially foreign ones) list and then blow up once a while when it is revealed to contain shenanigans. We see similar listing-blow ups in our local markets but I just wonder if foreign investors have similar sentiment as local investors in trying to "blame the authorities" whenever there is a problem.

Luckin Coffee receives Nasdaq delisting notice

The US exchange cited concerns over Luckin's fabricated transactions and the company's past failure to publicly disclose material information, Luckin said in a regulatory filing on Tuesday. It will remain listed pending the outcome of an appeal hearing, which is expected to be scheduled within 45 days of a hearing request.

The disclosure comes amid heightened economic tension as Nasdaq plans to tighten listing rules for companies from China, France and other markets with national security or other laws restricting US regulators' access to information. The stock exchange also plans to impose a minimum fundraising size and float requirement, a filing shows.
Luckin Coffee to pay $180 million penalty to settle accounting fraud charges -U.S. SEC

By Katanga Johnson
DECEMBER 17, 20205:38 AM

(Reuters) - Luckin Coffee Inc has agreed to pay a $180 million penalty to settle accounting fraud charges for “intentionally and materially” overstating its 2019 revenue and understating a net loss, U.S. regulators said on Wednesday.

The U.S. Securities and Commission (SEC) fine on the China-based rival to Starbucks comes after it said earlier this year that much of its 2019 sales were fabricated, sending its shares plunging and sparking an investigation by China’s securities regulator and the SEC.

The SEC said it found that Luckin “intentionally and materially overstated its reported revenue and expenses and materially understated its net loss in its publicly disclosed financial statements in 2019.”

Luckin has not admitted or denied the charges, the SEC said. The company has agreed to pay the penalty, which may be offset by certain payments it makes to its security holders in connection with its provisional liquidation proceeding in the Cayman Islands.

“This settlement with the SEC reflects our cooperation and remediation efforts, and enables the company to continue with the execution of its business strategy,” Dr. Jinyi Guo, Chairman and Chief Executive Officer of Luckin Coffee said in a statement.

“The Company’s Board of Directors and management are committed to a system of strong internal financial controls, and adhering to best practices for compliance and corporate governance,” Guo added.

The transfer of funds to the security holders will be subject to approval by Chinese authorities.

“Public issuers who access our markets, regardless of where they are located, must not provide false or misleading information to investors,” SEC Director of Enforcement Stephanie Avakian said in a statement.

“While there are challenges in our ability to effectively hold foreign issuers and their officers and directors accountable to the same extent as U.S. issuers and persons, we will continue to use all our available resources to protect investors when foreign issuers violate the federal securities laws,” she said.

Founded in June 2017, Luckin had one of the most successful U.S. IPOs by a Chinese company last year, attracting interest from prominent U.S. investors, including long-only funds and hedge funds.

But Luckin said in early April that as much as 2.2 billion yuan ($310 million) in sales last year were fabricated by its Chief Operating Officer Jian Liu and other staff, who had been suspended while the company carried out its investigation.

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Specuvestor: Asset - Business - Structure.
China is competitive and dynamic. But also makes it up for its market breadth.

China’s Luckin Coffee back from brink and beating Starbucks

Luckin’s recent growth to more than 18,500 stores, roughly double from a year earlier, was also led by a push beyond mega cities like Shanghai and Shenzhen into the vast hinterland where Starbucks has not yet ventured.

To entice greater swathes of China’s tea-drinking population to try coffee, Luckin developed drinks catering to local preferences for sweet and milky beverages.
Indeed Luckin is one of the most amazing turnaround I've seen. Pre-COVID all I saw in Guangzhou was a Luckin Coffee machine with a table and self-payment to call an outlet.

Now their coconut coffee has led the way. Also shows that human experience is more than just efficiency
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

Think Asset-Business-Structure (ABS)

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