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Luckin Coffee surges 50% in market debut

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Reinout Schakel, chief financial officer of Luckin Coffee Inc., speaks during a television interview ahead of the company’s initial public offering (IPO) at the Nasdaq MarketSite in New York, on Friday, May 17, 2019.

Victor J. Blue | Bloomberg | Getty Images

Shares of Luckin Coffee surged 50% Friday morning in its market debut.

The Chinese company’s opening trade was $25 per share. It is trading on the Nasdaq under the symbol “LK.”

On Thursday night, Luckin priced its initial public offering at $17 per share, for an implied market value of roughly $4 billion. The Beijing-based chain also boosted its IPO to 33 million shares, 3 million more than initially planned. Its IPO price is on the high end of its expected range of $15 to $17 per share.

Luckin is trying to overtake Starbucks as the biggest coffee chain in China. Since it was founded less than two years ago, it has opened 2,370 stores and plans to add 2,500 this year alone. Roughly 90% of its stores are smaller format stores designed for easy pick-up and proximity to its customers, in contrast to Starbucks’ larger and more homey stores.

“We have done what most people do in 15 or 20 years,” Luckin CFO Reinout Schakel said on CNBC’s “Squawk Box ” ahead of the company’s Nasdaq debut.

This year, Starbucks is celebrating its twentieth anniversary in China.

Luckin has also tried to attract new customers by discounting its drinks, a strategy that Starbucks CEO Kevin Johnson has said is not sustainable. But investors may disagree.

In 2018, the chain reported net sales of $125.3 million and a net loss of $241.3 million. Shareholders will want to see the company become profitable eventually. The $561 million Luckin raised through the IPO will help fund new stores, customer acquisition, tech investments and other general corporate purposes.

Luckin is the latest company to make its debut on the stock market this year. While ride-hailing giants Uber and Lyft have had rocky entries into the public market, others like Beyond Meat have seen shares soar.

This story is developing. Please check back for updates.

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