Update: Luckin Coffee Accedes to Delisting From Nasdaq
Luckin Coffee Inc. will be delisted from the Nasdaq after it received two notices from the New York-based stock exchange over failure to meet listing rules, the scandal-plagued Chinese coffee chain said Friday.
The company originally scheduled a hearing on the issue for June 25. But the day before the hearing it withdrew the request and decided not to fight the Nasdaq’s delisting decision, according to a statement issued Friday.
The company’s shares will be suspended at the opening of business Monday. The stock plunged more than 55% to $1.32 Friday morning. Luckin was listed on the Nasdaq in May 2019 with an initial public offering price of $17 each. At its peak, Luckin traded at just over $50 a share with a market value of $12 billion.
The Nasdaq will file a notice of delisting when all appeal periods have expired, Luckin said.
Luckin's board will also require Chairman Lu Zhengyao, also known as Charles Lu, to resign. The proposal was requested by a majority of directors and was based on the findings of an internal investigation, the Chinese company said in a filing. The board will hold a special meeting on the matter on July 2.
Luckin had also previously scheduled another meeting for July 5, at which it was expected to seek resignations of four of the company’s five remaining directors who pre-dated the scandal, including Lu. It was unclear if that meeting, which was designed partly to help it argue a case against delisting, will proceed on schedule following the company's latest desicion not to fight its delisting.
The Chinese challenger to Starbucks has been embroiled in a financial reporting fraud investigation after it disclosed that nearly half the revenue it posted for the last three quarters of 2019, or 2.2 billion yuan ($311 million), was fake.
The scandal led to the terminations of key executives, including the chief executive and chief operating officers. Chairman Lu may face criminal charges in China after authorities discovered emails in which he instructed colleagues to commit fraud.
Lu resigned earlier this month as chairman and non-executive director of Car Inc., China’s biggest rental-car fleet operator that was part of his business empire.
Luckin said in a statement on Saturday that its more than 4,000 outlets in China will resume normal operations and its almost 30,000 employees will continue to serve customers.
The Nasdaq's reasons for delisting include public concerns raised by the fabricated transactions and the company’s failure to disclose material information and file its 2019 annual report. The company attributed the failure to file the annual report to the complexities of the global coronavirus pandemic and its own investigation into fraud claims.
The case triggered a wave of backlash from American regulators and politicians against U.S.-listed Chinese companies. The U.S. Senate passed a bill that would ban listing of companies that don’t comply with certain financial transparency requirements. Earlier this month, U.S. President Donald Trump ordered financial regulators to recommend actions he could take against U.S.-listed Chinese firms that engage in fraud.
Bloomberg contibuted to this report
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