Monday 29 May 2023

Luckin Coffee is reportedly planning to relist in the US two years after scandal

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MILAN – Luckin Coffee is exploring plans to relist its shares on the Nasdaq by the end of this year, two years after the Chinese coffee chain’s $300 million accounting scandal, according to a report from the Financial Times.

Citing two people familiar with the matter, the FT says Luckin Coffee believes it can offer investors an attractive opportunity after it brought in new management and has seen recent growth at its stores.

The fraud revelations were first published in early 2020 by short seller Muddy Waters, which accused the chain of having an “inherently flawed” business model and inflating sales.

Once regarded as the biggest challenger to Starbucks’ dominant position in the Chinese market, Luckin delisted from the Nasdaq in June 2020 and agreed to pay $180 million six months later to settle the accounting fraud charges filed by the the U.S. Securities and Exchange Commission.

Since then, Luckin has restructured some of its debt, paid down a sizable portion of its SEC fine, and appointed new auditors.

According to the report, Luckin’s third-quarter revenue jumped 106% to $370 million, though the strong growth can likely be attributed to a decline in year-ago sales during the first year of the COVID-19 pandemic.

Luckin operates 5,671 stores, about 500 more stores than Starbucks operates in China.

Ahead of the proposed relisting, Luckin held meetings with investors and advisers to discuss other options for capital raising, says the report.

A spokesperson for Luckin Coffee declined to comment.

A relisting for Luckin Coffee would likely face fewer regulatory obstacles than other Chinese company pursuing an initial public offering in the U.S. because its shares are still traded there and it has continued to file earnings reports, concluded the FT.

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