Coffee chains are fighting five millennia of heritage in China. According to legend, tea-drinking started in 2737 BC when leaves blew into an emperor’s cup of boiled water. Starbucks and local rival Luckin want to rewrite local tradition in favour of newfangled coffee. To fuel expansion, the Chinese café group is raising funds in the US. The initial public offering may deliver more froth than caffeine hit. 

Luckin will raise up to $510m by selling 30m American Depositary Shares (ADS), each worth eight ordinary shares. Seen as Starbucks’ only serious rival in China, the group is valued at $2.9bn from funding rounds by investors including BlackRock of the US and Singapore’s GIC.

Luckin plans to open up to 300 new stores a month and losses are rising. It will soon overtake Starbucks by number of stores, but not much else. Net losses were $241m on sales of $125m last year. The deficit stood at $82m in the first quarter of this year. The valuation suggests a forward price-to-sales ratio of around 18. The figure would be higher if the issue price is set near the top of the range of $15 to $17 per ADS. Starbucks, by comparison, has a price-to-sales ratio of 3.8.