Abu Dhabi sovereign fund invests $1 billion in Luckin Coffee, which now has over 36,000 stores

Luckin Coffee, the Chinese coffee chain that nearly collapsed after a massive accounting fraud, has staged a remarkable recovery.

Recently, Abu Dhabi's sovereign wealth fund Mubadala Investment Company announced a strategic minority investment of approximately $1 billion, partnering with Luckin's controlling shareholder. Mubadala, which manages around $385 billion in assets, has previously invested in SHEIN and acquired UCB's core business in China. Now, it is betting on coffee.

This is the same company that was once branded a "fraudster" after self-reporting a $2.2 billion accounting scandal and being delisted from Nasdaq.

Six years ago, Luckin was condemned by the entire capital market. Today, it operates 36,000 stores, serves over 113 million monthly transacting customers, and generates nearly 50 billion yuan in annual revenue—so much so that a Middle Eastern sovereign fund has come knocking.

Its share price has climbed from a low of $1.54 to over $30, a gain of more than 20 times.

From a pariah to a darling of capital markets—what exactly happened to Luckin?

Phoenix from the Ashes

Let's rewind to 2020.

That year, Luckin self-reported that it had inflated revenue by approximately 2.2 billion yuan in 2019. Its stock price plummeted 80% overnight, and it was delisted from Nasdaq, moving to the over-the-counter (OTC) market.

Founding team members including Qian Zhiya and Lu Zhengyao were purged. Guo Jinyi took over as chairman and CEO under immense pressure.

At the time, almost no one believed Luckin could turn things around.

Fines, lawsuits, debt restructuring—mountains of challenges weighed down the company, which was only three years old.

But Luckin survived.

In 2021, a product called the Raw Coconut Latte took off, selling over 70 million cups for the year, pulling Luckin back from the brink.

Then came the Coconut Cloud Latte and the Sauce-Flavored Latte, one after another. Luckin won back consumers with an almost frenetic pace of product innovation.

In February 2022, Luckin reached a $180 million settlement with the U.S. Securities and Exchange Commission and completed its bankruptcy restructuring.

By October 2023, it had repaid all its debts ahead of schedule.

In 2024, it became one of the first Chinese concept stocks to pass on-site audits.

By 2025, Luckin delivered a stunning performance:

• Total net revenue: 492.88 billion yuan, up 43% year-over-year
• Net profit: 3.6 billion yuan, up 21.8%
• Annual beverage sales: 4.1 billion cups—equivalent to nearly three cups per person in China
• GAAP operating profit: 5.073 billion yuan, with an operating margin of 10.3%

As of June 30, 2026, Luckin had 36,310 stores globally, adding over 5,000 net new stores in the first half of the year.

For comparison, Starbucks, after more than two decades of painstaking effort in China, has only about 8,000 stores. Luckin has achieved more than four times that number in less than ten years.

Moreover, Starbucks has approximately 41,000 stores worldwide. If Luckin maintains its current pace of expansion, it could soon catch up to—or even surpass—the global coffee giant with over half a century of history.

The Dark Side of Rapid Expansion

But the story is not all rosy.

The side effects of breakneck growth are already showing.

In the second quarter of 2026, Luckin's same-store sales at self-operated stores fell 5.3% year-over-year, following a 0.1% decline in the previous quarter.

In other words, new stores are cannibalizing traffic from existing ones. Every new store opening means fewer sales for nearby older stores.

Profit margins are also under pressure.

In the fourth quarter of 2025, Luckin's net profit fell 39% year-over-year to 518 million yuan, primarily due to a 94.5% surge in delivery costs.

At the time, the food delivery war was raging. Consumers got used to ordering coffee from home, but the fulfillment cost for each delivery order ate into profits.

For the full year 2025, Luckin's delivery expenses reached 6.879 billion yuan, a 143.8% increase year-over-year.

CEO Guo Jinyi acknowledged the issue, stating that delivery costs as a percentage of revenue were too high and unit economics were suboptimal.

However, as the delivery war began to subside, Luckin's delivery costs in the second quarter of 2026 fell 3.1% year-over-year to 1.618 billion yuan—the first year-over-year decline since the delivery war began. The cost ratio has gradually improved.

But the improvement in delivery costs masks a more fundamental problem: Luckin is facing an increasingly brutal competitive landscape.

The Coffee and Tea Battle Royale

Luckin's story becomes even more intriguing when viewed against the backdrop of the broader coffee and tea industry.

In the first half of 2026, six listed tea beverage companies in China reported combined revenue of approximately 36.78 billion yuan, up just 9% year-over-year. Their net profit attributable to shareholders fell about 2%.

Compared to the 20%+ growth rates of previous years, the entire industry has clearly slowed down.

In 2025, China's new-style tea beverage market grew 5.7% year-over-year, while the coffee beverage market grew 9.6%. Both ended a streak of double-digit growth that had lasted for several years.

As the "10,000-store" targets set in previous years have been largely achieved, and as more emerging brands nibble away at market share, major tea and coffee brands have unanimously slowed their pace.

But what happens after slowing down?

The answer: cross-industry expansion.

The line between milk tea and coffee is blurring.

Tea brands are charging into the coffee space, while coffee brands are selling tea beverages. Two once-distinct industries are now thoroughly intertwined.

Guming is the most aggressive example.

This tea company, with a market cap of over 45 billion yuan, announced it would invest 400 million yuan to expand its coffee category, aiming to increase coffee's revenue share from 10-15% to 20-25%—nearly doubling it.

As of June 2026, approximately 13,500 of Guming's stores (over 90% of its total) were equipped with coffee machines.

It was precisely the morning revenue from coffee that sustained Guming's growth in the first half of the year.

Other players are following suit:

• Chabaidao, Auntea Jenny, and Mixue have all joined the fray.
• Mixue has installed fresh-brew coffee machines in about 6,000 of its stores.
• Auntea Jenny has upgraded coffee machines in over 9,000 stores.
• Lucky Cup, a Mixue subsidiary, has already surpassed 10,000 stores, using Mixue's low-price, high-density, supply-chain-driven strategy.

On the coffee side, Luckin's biggest rival, Cotti Coffee, has not been idle.

Cotti now has approximately 16,000 stores across 358 cities, making it the coffee brand with the widest city coverage.

However, in the first half of 2026, Cotti closed over 600 stores within 90 days, and many franchisees posted transfer notices on social media.

Even more telling is the shift in the price war.

In early 2026, Cotti announced it would end its promotion of unlimited 9.9-yuan drinks, retaining low prices on only 3-7 products while restoring regular prices on the rest. Some core products saw price increases of 30-60%.

The "9.9 yuan war" that raged from 2023 to 2026 is finally receding.

But after the tide goes out, what remains is an even more brutal competition for existing market share.

Luckin's competitors have not diminished—they have multiplied.

How will Luckin survive this fierce battle?

Cheap or Expensive?

From a capital markets perspective, Luckin's valuation has always been a point of contention.

Currently, Luckin's price-to-earnings (P/E) ratio is around 19x, far below Starbucks' 58x but higher than Mixue Group's 11x.

If benchmarked against Starbucks, which has global brand influence, 19x looks cheap. But if valued simply as a restaurant company, 19x is not low.

This number itself reveals a problem: the market is uncertain whether Luckin has the potential to become an international brand.

Over the past year, Luckin's stock price has largely stagnated. This may reflect the market's rapidly waning interest in its growth story.

This also helps explain why Mubadala invested $1 billion in Luckin after all these years.

One easily overlooked detail: this transaction was not a typical equity offering. It was a secondary share sale.

Existing investors in two older funds managed by Centurium Capital exited, with Mubadala stepping in as a new investor. The funds did not flow into Luckin's corporate account.

Currently, Luckin has 10.9 billion yuan in cash and short-term deposits, with net cash inflows of 2.63 billion yuan in the second quarter. It is not short of cash.

So what is the money for?

Market speculation points to acquisitions.

Earlier this year, Centurium Capital acquired the premium coffee brand Blue Bottle Coffee from Nestlé for $400 million. Luckin and Centurium had previously jointly bid for Costa Coffee.

If Luckin wants to tell a new growth story—for example, entering the premium coffee market through acquisitions or accelerating international expansion by buying overseas targets—this $1 billion provides ample ammunition.

Currently, Luckin has only 223 overseas stores, accounting for 0.6% of its total. The potential for international expansion is enormous.

Another possible use: facilitating a return to the main U.S. stock exchange.

In November 2025, Guo Jinyi publicly stated that Luckin was actively working toward relisting on a major U.S. exchange. Although the company later said there was no set timeline, the signal was clear enough.

Mubadala's strategic investment provides Luckin with international capital market credibility.

If it returns to a major exchange, liquidity and valuation typically improve simultaneously. The OTC market has average daily trading volumes of only a few million dollars, most U.S. mutual funds and ETFs cannot trade Luckin shares, and there is no options market or margin trading.

Institutions generally expect that after relisting, Luckin's reasonable P/E ratio could rise to 18-22x.

Conclusion

From its first store in Beijing's Galaxy SOHO to a coffee empire spanning 36,000 stores worldwide, Luckin's story over the past decade is more dramatic than many novels.

But the coffee industry has never lacked drama.

Starbucks took 50 years to teach Chinese consumers to drink coffee. Luckin took less than 10 years to turn coffee into a 9.9-yuan daily staple.

In the next decade, tea and coffee may fully merge. The populations drinking milk tea and coffee are increasingly overlapping. Can Luckin maintain its position?

For Luckin, what matters now is no longer the past—or even the present. It is whether, in the next decade, it can continue to rewrite the rules of the industry.