Starbucks Rival Burns Investors as Stock Sinks 43% From Highs

An employee, left, serves a coffee beverage to a customer at a Luckin Coffee outlet in Beijing, China, on Tuesday, Jan. 15, 2019. Luckin, the Chinese startup that's banking on selling cappuccinos to on-the-go office workers, is spending millions of dollars a year opening outlets to unseat Starbucks Corp. as the top java seller in the country. Photographer: Gilles Sabrie/Bloomberg , Bloomberg

Janet Freund, Bloomberg News

May 23, 2019

Share

(Bloomberg) -- Luckin Coffee Inc.’s initial public offering was met with great fanfare -- and then it wasn’t.

Shares of Xiamen, China-based Luckin Coffee soared as much as 53% to $25.96 on May 17, their first day of trading in the U.S.

Since then, the stock has plunged 43% as investors question the company’s sacrifice of profits in favor of a costly homeland expansion strategy, at the same time as the rocky China-U.S. trade relationship weighs on global markets.

Of this year’s initial public offerings that raised at least $500 million, Luckin’s 13% decline from its offering price of $17 per share makes the coffee retailer the second-worst performing stock, behind only Lyft Inc., which is down 20% since its offering price of $72 in late-March.

Hedgeye analyst Howard Penney is among the market watchers fooled by the Luckin. Last week, Penney projected 50 percent upside for the stock.

To contact the reporter on this story: Janet Freund in New York at jfreund11@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Scott Schnipper

©2019 Bloomberg L.P.