Checkout
Burning Cash Is Strategy of Choice for China's Starbucks Rival
- Luckin Coffee’s plan may be risky approach for selling java
- IPO raised $561 million; shares surge in first day of trading
A customer enters a Luckin Coffee outlet in Beijing.
Photographer: Gilles Sabrie/BloombergThis article is for subscribers only.
The team behind Luckin Coffee Inc. is betting that what worked for them in car rentals will prove a success with java. Their $130 million annual cash burn -- and rival Starbucks Corp.’s dominance in the Chinese coffee market -- makes it a risky proposition.
For now, American investors seem impressed enough by Luckin’s aggressive expansion plan for the Xiamen-based company to raise a higher-than-expected $561 million in its initial public offering Thursday. The stock jumped 20% to $20.38 in New York on Friday, compared with a decline in the S&P 500 Index.