The "Key Obstacles" to Luckin Coffee's Re-listing

Author: Liu Yichen

Editor: Lin Ke

According to data from the All-China Federation of Industry and Commerce on August 28, Luckin Coffee has entered the ranks of the top 500 private enterprises in the country with a revenue of 34.475 billion yuan in 2024.

This is the first time Luckin has made it onto this list, and its performance is further accelerating this year.

In the first half of 2025, Luckin's operating revenue and net profit attributable to the parent company (excluding non-recurring gains and losses) reached 21.224 billion yuan and 1.789 billion yuan, respectively, with year-on-year growth of 44.57% and 17.89%, both setting new highs for the half-year period.

With the rapid improvement of its fundamentals, coupled with the debut of Li Hui, the chairman and CEO of the behind-the-scenes operator, Dazheng Capital, who replaced Guo Jinyi as the new chairman of Luckin at the end of April this year, market speculation about when Luckin will be able to return to NASDAQ and restore its listing status has quickly heated up.

This year marks the fifth year since Luckin was delisted after the financial fraud scandal, and it is believed that if Luckin wants to relist, it still faces challenges such as hiring top auditing firms and restoring market trust.

Some analysts also believe that if Luckin faces significant difficulties in relisting, the possibility of first going private and then listing in Hong Kong cannot be ruled out. However, the main difficulty of this path lies in the fact that Luckin's current valuation in the pink sheet market is not low, and the premium for privatization would impose significant cost pressure on potential buyers.

According to first-level investors close to Luckin, the special status of Luckin being operated by Dazheng Capital, which is "PE-led," has also brought subtle impacts on its future capitalization expectations.

Returning to the operational dimension, this domestic coffee chain leader is also facing attacks from large challengers such as Kudi, Mixue Lucky Coffee, and others. There is also uncertainty about how long the current high-performance state can be maintained.

Whether and when to restart the listing, Luckin may need to make a decision soon.

Is the Timing Right?

In the recently concluded second quarter, Luckin achieved another breakthrough in performance driven by the takeaway battle: net revenue increased by 47.1% year-on-year to 12.359 billion yuan, and GAAP operating profit increased by 61.8% year-on-year to 1.7 billion yuan.

The average monthly number of transacting customers rose to 91.7 million, a year-on-year increase of 31.6%, setting a historical record while pushing the cumulative number of transacting customers to over 380 million.

Specifically, coffee revenue reached 9.49 billion yuan, a year-on-year increase of 44.9%; fresh tea beverage revenue also increased from 6.01 billion yuan in the same period last year to 8.67 billion yuan, with a growth rate of 44.3%.

Luckin's ability to efficiently capture and convert the traffic brought by subsidies is supported by its large store network and supply chain system.

Luckin currently has over 26,200 stores, surpassing the total number of Kudi, Starbucks, and Lucky Coffee combined in the country.

CEO Guo Jinyi pointed out that the highly standardized store processes ensure production efficiency, and the supply chain system built over the years supports the stability of product supply and the reliability of takeaway timeliness.

In fact, even without the push from takeaway subsidies, Luckin is currently in the "tailwind" situation with the least performance pressure in recent years.

Luckin's CFO An Jing stated earlier this year that the single-cup price in 2025 will remain the same as in 2024. As more self-operated stores mature, it is expected that the daily cup volume per store will achieve year-on-year growth These factors have jointly driven same-store sales into a positive cycle this year.

In the second quarter, Luckin's same-store sales growth rate for self-operated stores rose to 13.4%, returning to double-digit growth, further improving from 8.1% in the first quarter; the operating profit margin of self-operated stores remained stable at 21%.

In terms of scale, Luckin maintains a relatively leading expansion speed.

In the second quarter, 2,109 new stores were added, accelerating from 1,757 in the first quarter, with the expansion speed far exceeding the management's initial expectation of 4,000 stores for the entire year.

From the store structure perspective, the ratio of self-operated to joint-operated stores among the new stores in the first half of the year was approximately 7:5. When store profits and same-store performance are stable, Luckin tends to accelerate the opening of self-operated stores, reflecting the company's confidence in the current business outlook.

The current highlight of performance and growth potential may become a good opportunity for Luckin to make a comeback and restore its listing status on the Nasdaq main board, and discussions within the industry are ongoing.

The market's expectation for Luckin's relisting is not unfounded.

As early as 2024, the Financial Times reported that Luckin was preparing to relist in the U.S. market, but shortly after, this news was denied by then-chairman Guo Jinyi, who stated that there was no clear timetable for the listing at that time.

On the operational level, Luckin also seems to be preparing to regain trust in the U.S. market—on June 30 of this year, Luckin's first batch of stores in the U.S. officially opened.

A North American investment banker close to Luckin stated that Luckin is currently in a pink sheet over-the-counter listing status after delisting. Apart from relatively relaxed information disclosure requirements, under U.S. legal frameworks, it is actually treated as a listed company for regulatory purposes. However, if Luckin wants to gain recognition and financing from international investors and pave the way for globalization, it still needs to restore its previous main board status.

However, standing at this point, the challenges facing Luckin on the road to relisting are not simple.

Audit Resolution

To untie the bell, one must tie it.

Having triggered delisting due to fraud in the past, the primary issue Luckin must resolve to relist is how to restore market trust in financial disclosures.

Industry insiders believe that the past financial fraud and frequent changes in auditing firms are indeed key obstacles on Luckin's path to relisting.

"The financial issues that arose previously, along with several changes in auditing firms, and even some auditing firms being penalized, all pose compliance challenges for a potential relisting in the future," pointed out an investor close to Luckin.

During the financial fraud scandal, Luckin did indeed change auditing firms multiple times.

After the financial fraud incident in early 2020, one of the Big Four, Ernst & Young, was unable to provide services, and the firm that took over, Baker Tilly, also chose to exit less than a year later.

The next firm to step in was Zhongzhengda Accounting Firm from Hong Kong, which was recently disciplined by the PCAOB (Public Company Accounting Oversight Board) in July 2025.

In this disciplinary action, Zhongzhengda was accused of "not obtaining sufficient appropriate evidence in multiple significant risk areas" and "failing to identify and assess the risk of material misstatement," ultimately leading to the permanent revocation of its PCAOB registration Until Luckin Coffee completed its debt restructuring after the fraud scandal and ended its bankruptcy protection process, it changed its auditing firm to the current Lixin.

"Although these are old issues that arose before the fraudulent debt restructuring, such a blemish may still be a real scar for intermediaries and investors," said an investor close to Luckin.

In this person's view, whether Luckin can successfully return to Nasdaq hinges on whether it can successfully hire one of the Big Four influential auditing firms to assist in the listing.

The Burden of Scars

According to Nasdaq rules, companies seeking to go public must have an audit report provided by a PCAOB-registered auditing firm.

"Currently, (Lixin) does have qualifications, but it is customary for Chinese concept stocks to seek audits from the Big Four," said the investor close to Luckin. "Moreover, Luckin's franchise model has higher requirements for financial audits."

In their view, for issuers like Luckin that have previously engaged in fraudulent activities, gaining recognition from international investors often requires the endorsement of an international top auditing firm represented by the Big Four.

Luckin may face certain challenges in re-hiring the Big Four as its listing auditing firm.

"The impact of the fraud incident is still significant, the risk of audit endorsement remains high, and PCAOB's regulation of auditing firms for Chinese concept stocks is becoming stricter, especially after the audit regulatory cooperation between China and the U.S. began in 2020, the branches of the Big Four in China are facing stricter compliance and regulation," said a person from a leading auditing firm dealing with Chinese concept stocks.

"Luckin's complex franchise model and rapidly expanding business system actually impose very strict requirements on the design and execution of audit procedures," the person said.

It is worth mentioning that after the fraud scandal, the restructuring trustee of "Old Luckin" also hired one of the Big Four, KPMG, to participate in the restructuring and liquidation.

However, industry insiders believe that the audit risks of debt restructuring and relisting are fundamentally different.

"The audit risk of restructuring is only directed at new investors, while listing is aimed at the public, and the audit risks of the two are not the same," said a foreign investment banker. "The compliance requirements and difficulties for re-IPO are much higher, so re-hiring the Big Four is not an easy task."

According to the investor close to Luckin, since the completion of the restructuring, Luckin has not given up on seeking to re-hire the Big Four as its auditing firm, but progress has not been smooth.

"After the restructuring, Quiet was brought in as CFO, one of the purposes was to promote the subsequent re-introduction of the 'Big Four'," the investor close to Luckin revealed.

Quiet previously served as CFO at Swan Home for six years and led the U.S. IPO of Swan Home, which was later withdrawn due to policy reasons; when Quiet joined Luckin in 2022, they also stated, "It will take a lot of money and effort to resolve the legacy issues of financial fraud."

"The key is whether many of the legacy issues of Old Luckin have been fundamentally resolved. Additionally, the SEC previously focused more on the company's accounting aspects, but whether there are still compliance issues related to transactions such as insider trading based on the previous fraud may also need to be observed," pointed out the investor close to Luckin "The contradiction lies in whether the Big Four can take on the listing audit of Luckin and in what form." A person from the auditing agency admitted, "It is an objective fact that the issuer has a history of fraud, but how to define the boundaries between the old and new entities and management teams, how to give the new entity 'another chance,' and whether there should be higher entry verification standards are all worth discussing."

Special Operations

If it is difficult to bring in the Big Four to undertake the listing audit work, Luckin's path back to Nasdaq may still face obstacles.

Some analysts pointed out that another feasible path for Luckin's listing is privatization and changing the listing target, that is, initiating a tender offer through major shareholders or external consortiums to delist Luckin from the OTC market and then choose to list in other markets such as Hong Kong.

"Privatization is, to some extent, a way to get rid of the 'delisting aftereffects' and a more thorough way to restore capital image. It can also reduce short-term financial pressure from public shareholders and focus more actions on medium- to long-term strategic investments," said a foreign investment banker. If Luckin's relisting still faces the test of original sin, "the privatization path of 'one step to two steps' is also a more realistic option."

A primary market LP revealed to Xin Feng that privatization is somewhat feasible for Luckin's current capital structure, and there have been similar rumors in the market.

In fact, privatization can provide a "strategic buffer" for listing to some extent, but the implementation process also faces issues such as high acquisition funding costs, dilution of shareholder equity, and extended listing timelines.

Currently, Luckin's valuation in the OTC market is not low.

As of the close of U.S. stocks on September 5, Luckin's total market value reached $10.339 billion. Considering the holdings of major shareholders like Dazhong, Yuyue, and IDG, Luckin's privatization still requires gathering billions of dollars in funding.

During the same period, the dynamic PE and PB were 18.88 times and 5.46 times, respectively. Compared to the 32 times and 6.5 times of the already listed Mixue Group in Hong Kong, the potential for valuation increase for Luckin's relisting may be relatively limited without fully considering growth.

Moreover, for Luckin, seeking to return to the capital market after privatization still cannot avoid a thorough cleanup of historical issues and compliance reconstruction.

Industry insiders pointed out that a significant peculiarity affecting Luckin's listing expectations lies in the decision-maker—Dazhong Capital's PE shareholder identity.

As of the end of February 2025, Dazhong Capital holds 17.4% of Luckin's Class A shares and 100% of Class B shares, with a total voting power exceeding 53%; in April this year, Li Hui officially became the chairman of Luckin Coffee, which also means a further strengthening of Dazhong Capital's control over Luckin.

"It is relatively unusual for a PE institution to be the main decision-making shareholder in the domestic market because the LPs behind the PE institution theoretically have a final exit demand, especially after the invested company goes public," said an investor close to Luckin. "Once listed, Dazhong will have to choose whether to exit, increase LP's DPI (Distributions to Paid-In) through dividends, or directly let LP cash out, which may pose a dilemma."

Luckin's capital consortium is mainly divided into two categories: one is LPs that indirectly hold Luckin equity through holding shares in Dazhong Fund, and the other is direct investment institutions that directly hold Luckin shares, and there may also be overlaps between the two "The demands of the two types of investors may not be the same. Direct investors are likely hoping to go public for liquidity, but the demands of LPs may be more complex, such as whether they can still achieve expected returns after a long period of investment," said an investor close to Luckin. "For the fund manager (Dazhang Capital) itself, it may not necessarily have to exit through an IPO."

"Going public does create conditions for fund exit, but this may not only risk losing existing control over Luckin, affecting the company's long-term development, but also impact the management fee income under the private equity model; even if they exit, the question remains who will take on such a large stake," the person explained. "This may require the fund to seek a delicate balance between the realistic demands of LPs, Luckin's medium to long-term development, and its own interests."

Competition Pressure Remains

Standing at a high-performance period, the window for Luckin to return to the capital market with a high growth posture may not remain open for long.

The competitive landscape of the coffee market is always full of variables.

New competitors continue to emerge, and the industry remains in a state of dynamic game theory.

For Luckin, winning the price war comes with the reality that it has never been able to shake off the 9.9 yuan price anchor. Under the siege of similar brands like Kudi, Luckin continues to face real resistance to price increases.

Especially with the push of delivery subsidies this summer, the price war in the coffee market has reignited after easing in 2024, and the momentum is even stronger. For example, with support from JD.com's subsidies, Kudi even launched coffee priced as low as 2.9 yuan.

Brands in the low-price camp benefit more from subsidies and expand at a faster pace.

Data monitoring from third-party institutions like Jihai shows that Kudi's store opening speed significantly increased in May and June, reaching a thousand-store level.

As of now, Kudi's total number of stores, including existing standard stores, in-store shops, and convenience stores, has exceeded 15,000, including 3,000 stores that are yet to open.

At the same time, Lucky Coffee, which is attacking from lower-tier markets, is also accelerating its store openings. By July, its total number of signed stores had surpassed 7,000, achieving exponential growth compared to 4,000 at the beginning of the year.

Backed by Mixue Ice City, Lucky Coffee's purchasing power in the supply chain is evident. In 2024, Mixue not only signed a 4 billion yuan coffee bean procurement deal with Brazil but also announced plans to build a supply chain factory in Brazil.

Starbucks is also laying out countermeasures to defend the market position of the old giant: including but not limited to price reductions on "non-coffee" star products like Frappuccino, the comprehensive rollout of a sugar-free product system, and deep cooperation with Xiaohongshu around "interest community space."

The proactive localization strategy has already shown results: in the second quarter, Starbucks China's same-store sales increased by 2% year-on-year, and same-store transaction volume increased by 6% year-on-year.

The highly anticipated bidding for Starbucks China's business has also entered its final stage. The candidate list has been narrowed down to four institutions: Boyu Capital, Carlyle Group, EQT, and Sequoia China.

Starbucks' global CEO Brian Niccol revealed in an exclusive interview that they will seize the opportunity to open 20,000 or even 30,000 stores by finding suitable partners Competitors continue to emerge, forcing Luckin Coffee to invest heavily in the fierce competition for store locations, while the increasing number of stores will bring internal competition, making it difficult for same-store growth and scale expansion to coexist in the long term.

After the Coconut Latte, Luckin has yet to launch the next market-captivating phenomenon product.

From the perspective of product pull effects, in recent years, the benefits of Coconut Cloud Latte, Sauce-flavored Latte, and Jasmine Light Milk Tea for Luckin have gradually decreased.

When the Light Milk Tea's first product was launched, Luckin's average monthly transaction user count exceeded 79.8 million, with a year-on-year growth rate of 36.5%.

The performances of Coconut Cloud Latte and Sauce-flavored Latte were year-on-year growth rates of 69% and 75%, respectively.

From a long-term development perspective, returning to the mainstream capital market and rebuilding its main board listing status will become a financing channel, ammunition supplement, and reputation endorsement for Luckin's global expansion.

In the North American market, Luckin continues its cost-performance route, focusing on freshly brewed coffee priced at $1.99, significantly lower than Starbucks' local pricing of $3-5.

"Overseas listings must meet domestic internet data security regulatory requirements and obtain approval," said an investor close to Luckin. " The same issue exists for operations in the U.S. Considering the differences in commercial legal environments and regulatory jurisdictions, how Luckin addresses sensitive issues such as local user data privacy and whether it has made corresponding data localization deployments may become problems that need to be solved."

As of the second quarter, Luckin added 24 new stores in the international market, bringing the total number of stores to 89. This business is still in the investment phase and has not yet achieved profitability.

Whether from the perspective of consolidating defenses or expanding offensively, support from the capital market is crucial for Luckin.

What efforts will Luckin make to relist? The market is waiting for answers