Luckin Coffee Delays Annual Report Amid Scandal Probes
What’s New: Luckin Coffee Inc. won’t release its 2019 annual financial report on time Thursday as the company investigates a high-profile accounting scandal, the Nasdaq-listed Chinese coffee chain said Wednesday.
The delayed filing also reflects business disruption from the Covid-19 outbreak, which hindered employees returning to offices, Luckin said. The company will try to file the report under a 45-day extension allowed by U.S. securities regulators during the outbreak, it said.
Around 85% of the company’s coffee shops returned to normal operation by the end of March after a broad closure in January, Luckin reported.
Background: The Chinese challenger to Starbucks rattled the market earlier this month by disclosing that nearly half the revenue it reported in the last three quarters of 2019, or 2.2 billion yuan ($310 million), was fake. The company blamed Chief Operating Officer Liu Jian for the misconduct and said it initiated an investigation of Liu and four other employees.
The incident pushed Luckin’s shares down by 83%, wiping out more than $5 billion in market value before trading was suspended April 7. It also triggered a series of credit crises for companies linked to Luckin founder Lu Zhengyao.
A person close to the company said the internal investigation hasn’t been concluded after nearly a month, indicating possible resistance from management.
China’s securities and market regulators have opened a probe into Luckin last week.
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