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Luckin Co-Founders Hand Over Shares to Lenders After Defaulting on Half Billion Dollar Loan

By Ding Yi / Apr 07, 2020 03:36 PM / Business & Tech

Photo: VCG

Photo: VCG

Scandal-plagued Luckin Coffee’s two founders, Lu Zhengyao, also known as Charles Lu, and Qian Zhiya, also known as Jenny Qian, have reportedly handed over shares in the Chinese chain to a group of lenders after a company controlled by Lu’s family defaulted on a $518 million loan.

The news comes just days after Luckin confessed to fabricating sales worth 2.2 billion yuan ($310 million) for much of 2019, causing the company’s shares to drop nearly 80% in U.S. trading.

Some 515 million class B shares and 95.4 million class A shares of Luckin had been pledged to secure the $518 million loan, including shares additionally pledged by the family trust of Qian, Reuters reported Monday, citing a notice by Goldman Sachs Group to its clients. Goldman Sachs is one of the banks involved in the original loan.

The other lenders, which reportedly include Morgan Stanley, Credit Suisse and Barclays, have “commenced the process of enforcement against the collateral,” with plans to sell 76.4 million of the shares pledged, the South China Morning Post quoted Goldman Sachs as saying, which is acting as a disposal agent.

If all the shares pledged are sold, Lu’s voting interest in Luckin would not decrease, but Qian’s beneficial and voting interests would decrease significantly, Goldman Sach told Reuters, without specifying the size of the reduction.

The class B shares will be converted into American depositary shares, according to Reuters.

On Monday, shares of Luckin dropped a further 18.4% to an all-time low of $4.39.

The Xiamen-based coffee chain has suspended its chief operating officer Liu Jian and other employees involved in the alleged financial fraud and has launched an internal probe into the fabricated transactions between the second and fourth quarters of 2019.

Contact reporter Ding Yi (yiding@caixin.com)

Related: Luckin Scandal Raises Questions Over China’s IPO Reform


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