Abu Dhabi Sovereign Fund Invests $1 Billion in Luckin Coffee

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

Recently, Abu Dhabi's sovereign wealth fund Mubadala Investment Company announced a strategic minority investment of approximately $1 billion in Luckin Coffee, partnering with the company's controlling shareholder, Centurium Capital.

Mubadala, which manages approximately $385 billion in assets, has previously invested in SHEIN and acquired the core business of UCB Pharma in China. Now, it is betting on coffee.

This is the same Luckin that was shorted by Muddy Waters, admitted to $2.2 billion in accounting fraud, and was delisted from Nasdaq in disgrace.

Six years ago, Luckin was the target of widespread condemnation across capital markets.

Today, it operates 36,000 stores, serves over 113 million monthly transacting customers, generates nearly 50 billion yuan in annual revenue, and has attracted investment from a Middle Eastern sovereign wealth fund.

Its stock price has climbed from a low of $1.54 on the OTC market to over $30 — a gain of more than 20 times.

From pariah to darling — what exactly happened to Luckin?

01 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. The company was delisted from Nasdaq and moved to the OTC market.

Founders including Jenny Qian and Lu Zhengyao were ousted. Guo Jinyi took over as Chairman and CEO under emergency circumstances.

At that time, almost no one believed Luckin could recover.

Fines, lawsuits, and debt restructuring — mountains of pressure weighed down on a company that had only been founded three years earlier.

But Luckin survived.

In 2021, the launch of the Coconut Latte was a game-changer, selling over 70 million cups for the year and pulling Luckin back from the brink.

Then came the Coconut Cloud Latte, the Moutai Latte, and wave after wave of new products. 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.

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

In 2024, it became one of the first Chinese stocks to pass a PCAOB on-site audit.

By 2025, Luckin delivered a stunning set of results:

• Total net revenue: 49.288 billion yuan, up 43% year-over-year
• Net profit: 3.6 billion yuan, up 21.8% year-over-year
• Annual beverage sales: 4.1 billion cups — equivalent to nearly three cups for every person in China
• GAAP operating profit: 5.073 billion yuan, with an operating margin of 10.3%

As of June 30, 2026, Luckin's global store count reached 36,310, with a net addition of over 5,000 stores in the first half of the year.

For comparison, Starbucks — after more than two decades of painstaking effort in China — operates 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 globally. If Luckin maintains its current pace of expansion, it could soon catch up to or even surpass the half-century-old global coffee giant.

But the story is not without its blemishes.

The side effects of rapid expansion have become apparent.

In the second quarter of 2026, same-store sales at Luckin's self-operated stores declined 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 locations.

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 that time, the food delivery war was raging. Consumers had grown accustomed to waiting at home for their coffee, but the fulfillment cost for each delivery order was eating into profits.

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

Luckin 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 — with the cost ratio gradually returning to normal.

But the improvement in delivery costs masks a more fundamental problem: the increasingly brutal competition Luckin now faces.

02 The Coffee and Tea Battle Royale

Luckin's story becomes even more intriguing when viewed against the broader backdrop of the coffee and tea beverage 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 combined net profit attributable to shareholders fell about 2% year-over-year.

Compared to the 20%+ growth rates seen in 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 ending years of double-digit growth.

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 beverage brands have unanimously slowed their pace.

But what happens after slowing down?

Every major brand has made the same choice: cross over into the other's territory.

The line between milk tea and coffee is blurring.

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

Guming is the most aggressive example.

This tea beverage company, with a market value 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 Guming stores — over 90% of its total — had been equipped with coffee machines.

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

ChaPanda, Auntea Jenny, and Mixue have all followed suit.

Mixue has installed fresh-brew coffee machines in approximately 6,000 stores, while Auntea Jenny has upgraded coffee machines in over 9,000 stores.

Mixue's sub-brand, Lucky Cup, has already surpassed 10,000 stores, employing the same low-price, high-density, supply-chain-driven strategy as its parent.

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

Cotti currently operates approximately 16,000 stores across 358 cities, making it the coffee brand with the widest city coverage in China.

However, in the first half of 2026, Cotti closed over 600 stores within a 90-day period, and a large number of franchisees posted transfer notices on social media.

Perhaps the most telling development is the shift in the price war.

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

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

But after the tide goes out, what remains is even more brutal competition for a shrinking pool of customers.

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

How will Luckin survive this battle?

03 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 approximately 19x, far below Starbucks' 58x but above Mixue Group's 11x.

If benchmarked against Starbucks, a company with 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 a global brand.

Over the past year, Luckin's stock price has largely treaded water. 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 to raise capital. It was a secondary share sale.

Investors in two older funds under Centurium Capital exited, with Mubadala stepping in as a new investor. The funds did not flow into Luckin's corporate accounts.

Currently, Luckin has 10.9 billion yuan in cash and short-term deposits on its books, with a net cash inflow of 2.63 billion yuan in the second quarter. The company is not short of cash.

So what is the money for?

Market speculation points to acquisitions.

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

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

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

Another possible use is to facilitate a relisting on a major U.S. exchange.

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

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

Once relisted, liquidity and valuations typically improve. The OTC market has average daily trading volumes of only a few million dollars, most U.S. equity funds and ETFs cannot trade in it, and there is no options market or margin trading mechanism.

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

04 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 commodity.

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. What matters is whether it can continue to rewrite the rules of the industry in the next decade.

As for Luckin's ultimate fate, only time will tell.

Disclaimer: The views expressed in this article are those of the original author and do not represent the views or positions of格隆汇. Investment decisions should be based on independent thinking. This article is for reference only and does not constitute any actual operational advice. Investment risks are borne by the individual.