MILAN — Luckin Coffee stock lost more than a third of its value on Wednesday, as it resumed trading after more than a month’s halt. The Chinese coffee chain’s shares slumped almost 36% to close at $2.82 after falling to a low of $2.69, a far cry from its peak of $51.38 in January.
On Tuesday, the company received a delisting notice from the Nasdaq exchange. The exchange’s staff cited “public interest concerns” surrounding the accounting discrepancies, as well as past failure to disclose critical information, for its delisting recommendation.
The move comes after Luckin admitted last month that US$310 million of its sales were fabricated, as it announced an investigation into the conduct of former chief operating officer Jian Liu.
The company experienced a management shakeup in recent weeks, following the termination of former CEO Jenny Qian Zhiya and Liu Jian, and the appointment of Guo Jinyi, previously director and senior vice president of Luckin, as the new acting CEO of the firm.
Luckin Coffee has requested a hearing before the Nasdaq Hearings Panel, and will remain listed until it gets the opportunity to plead its case. Hearings typically take place 30 to 45 days after they are requested.
Nasdaq’s notice comes as the exchange renews its focus on auditing standards. This week it tightened listings rules, hoping to curb initial public offerings of Chinese companies closely held by insiders and opaque about accounting, Reuters reported.
Quo Vadis Capital thinks the stock will keep sinking. “We continue to see the most likely outcome as a complete wipeout for equity holders,” said John Zolidis, president of Quo Vadis, in comments sent to MarketWatch.
Zolidis forecasts that the company will have to start closing stores, which will do further damage
“Leaving aside the fraud, the figures that are available suggest that Luckin Coffee never had a viable business model,” Zolidis said, forecasting that the store closures will come as a result of losing access to capital. “The company grew too fast and acquired customers via promotional offers, without ever proving the economics.”