Personally Financing of USD 200 Million: True or False?
The non-executive chairman and angel investor of Luckin Coffee, LU Zhengyao is seeking a loan of at least USD 200 million from banks including Goldman Sachs and Morgan Stanley.
On Mar 12, 2019, Reuters reported that the non-executive chairman and angel investor of Luckin Coffee, LU Zhengyao (陆正耀), is seeking a loan of at least USD 200 million from banks including Goldman Sachs and Morgan Stanley. Reuters said that according to people with knowledge of the matter, LU would award them with the rights to join the Luckin’s IPO in U.S. EqualOcean contacted with Luckin Coffee to confirm the truth of this information but received no reply.
According to the earlier reports of Reuters, Luckin Coffee has already mandated Credit Suisse to lead its IPO in the U.S. and is estimated to be finished in May 2019. Besides Credit Suisse, Morgan Stanley and Goldman Sachs are also helped Luckin to prepare of IPO issues.
Introduced in last year, Luckin Coffee is expanding rapidly and completed 2 rounds of financing with USD 400 million. Luckin opened more than 2,000 stores within 1 year and plans to open more than 4,500 stores by the end of 2019, which aims to overtake Starbucks in China.
After the B round financing of Luckin Coffee in Dec 2018, the company was evaluated around USD 2.2 billion. EqualOcean used to analysis the possible valuation range of Luckin Coffee in 2021, and we believe that the valuation range of Luckin may between USD 3 billion to USD 8.1 billion. However, according to Reuters’s last month’s report, the IPO of Luckin would be given a valuation of about USD 3 billion. Although we did not get the reply from Luckin Coffee, we suspect that the information of the loan of USD 200 million might be true, for the valuation seek.
People who have knowledge about that told that LU told Goldman Sachs and Morgan Stanley that Credit Suisse has agreed to provide USD $200 million as a loan for him, reported by Reuters. However, these two investment banks are still negotiating on that. The Reuters also reported the loan collateral would be the share of Luckin Coffee. However, if Luckin fails in IPO, the loan collateral would be replaced by LU’s share in Shenzhou Cars Rental Company, which is listed in Hong Kong.
Reuters says that LU, as the chairman of Shenzhou Cars Rental Company, owns about 33% of the company’s share. However, EqualOcean can only find 15.1% of the Shenzhou’s share has a relationship with LU, according to public information.
The CEO of Luckin Coffee, QIAN Zhiya (钱治亚), is also the former COO of Shenzhou Cars Rental Company. EqualOcean found that the Credit Suisse and Morgan Stanley are the two investment banks which help with the IPO of Shenzhou in Hong Kong. Whether LU asks for a loan from these two banks, EqualOcean believes that Luckin coffee may have some cooperation with them.