Centurium Becomes Luckin Coffee’s Controlling Shareholder as Former Executives Exit

This is an English adaptation of a FoodBud historical article originally published on January 27, 2022.

On January 27, 2022, Centurium Capital announced that a buyer consortium it led had completed the acquisition of Luckin Coffee shares from certain shareholders. Other members of the consortium included IDG Capital and Ares SSG.

Luckin Coffee’s board and the company’s joint provisional liquidators reviewed and approved the transaction, stating that it was in the company’s best long-term interests.

What Changed

The deal involved 383,425,748 Class A ordinary shares held by certain former members of Luckin Coffee’s management team.

After those former management members defaulted on debt obligations, the court appointed joint liquidators to dispose of the shares on behalf of creditors.

According to Luckin Coffee’s announcement documents, the selling entities were controlled by affiliates of former Luckin executives Lu Zhengyao and Qian Zhiya, as well as their families. After Luckin’s accounting fraud scandal broke in 2020, shares pledged by Lu and the former management team fell sharply in value. The Cayman court placed those shares under liquidation administration by appointed liquidator KPMG to repay debts owed to multiple financial institutions.

The stake acquired by Centurium Capital, IDG Capital and Ares SSG was this liquidated block of shares.

Centurium Takes Control

After completion of the transaction, Centurium Capital became Luckin Coffee’s controlling shareholder, holding more than 50% of the company’s voting rights.

Centurium said it would continue supporting Luckin’s long-term growth and development, including the establishment of a sustainable business model, transparent governance system and responsible management structure.

At the time of the article, Luckin Coffee’s market capitalization was about US$2.26 billion.

Relisting Speculation

A few days earlier, the Financial Times reported that Luckin Coffee had held meetings with investors and advisers and was considering a return to Nasdaq, potentially as early as the end of 2022.

Luckin Coffee later denied the report, saying the online claims that it was considering a Nasdaq relisting were inaccurate.

The article noted that Luckin appeared capable of moving from the pink-sheet market back to Nasdaq, but that timing and necessity remained open questions.

Operating Recovery

Luckin Coffee’s third-quarter results, released on December 9, showed:

• Net revenue of RMB 2.35 billion, up 105.6% from RMB 1.143 billion in the same period of 2020.
• Product sales revenue of RMB 1.934 billion, up 83.9% from RMB 1.051 billion a year earlier.
• Net loss of RMB 23.5 million, down 98.6% from RMB 1.711 billion in the prior-year period.
• Same-store sales growth at self-operated stores of 75.8%.
• Franchise-store revenue of RMB 416 million, up 355% from RMB 91.5 million in the same period of 2020.
• Average monthly transacting customers of 14.7 million, up 79.2% from 8.2 million a year earlier.

For the first three quarters of 2021, Luckin’s net revenue was RMB 5.533 billion, up about 106% from RMB 2.688 billion in the same period of 2020.

In the third quarter, Luckin’s average daily cup sales per store reached 304.7, while average selling price per cup rose to RMB 15.22. The article also noted that almost no stores were closed in August and September, and that growth in self-operated store count had clearly accelerated.

According to the article’s assessment, Luckin’s period of adjustment in self-operated stores was nearing completion. Franchise stores had helped absorb pressure during the adjustment phase, while improving operations allowed third-quarter earnings to be reinvested into the business without materially changing cash levels, supporting self-funded expansion.

Note: IPO, relisting, market-capitalization and forward-looking figures are historical references from January 2022.