This Starbucks Competitor Has Crashed Since its IPO

Chinese Luckin Coffee just recently made its debut in the market and has been plunging since.

The first day of trading for the China-based company was tremendous, with gains of 53% as the stock sailed to $25.96 on May 17th.

Since then however, shares of Luckin Coffee have been on a downtrend and have sinked 43% since the stock’s peak.
Luckin Coffee has opened more stores in only two years than rival Starbucks has in twenty years. Currently the chain has attracted 16.8 million paying customers, and has opened 2,163 outlets across China.

The company, founded in Beijing in October 2017 has most of its outlets as small booths that fill online orders for pickup or delivery.

“Right now investors look at the company and they see growth, and that looks exciting,” says Ben Cavender, director of Shanghai-based consultancy China Market Research Group (CMR). “The thing is, if your only continuous path to growth is spending at this rate, it is very difficult to make a profit.”

Disclaimer: We have no position in Luckin Coffee – ADR (NASDAQ: LK) and have not been compensated for this article.