MILAN – Luckin Coffee announced Friday that it was giving up plans to appeal the Nasdaq exchange’s decision to delist the stock. The company notified in a statement the decision to withdraw its request for a hearing before the Nasdaq Hearings Panel, which was scheduled for June 25th, 2020.
“Luckin Coffee will suspend trading on the Nasdaq on June 29 and file for delisting,” the Chinese coffee chain said in a statement.
Luckin Coffee had previously received on June 23rd a new Delisting Notice from Nasdaq for failure to file its Annual Report
The stock of of Luckin, which fired its CEO and chief operating officer in May after it was discovered that the company fraudulently inflated sales, plunged more than 50% to about $1.40.
Nasdaq’s decision is motivated by public concerns raised by the fabricated transactions and by the company’s failure to disclose material information and to file its annual report.
Luckin, founded in 2017, went public last year and surged due to what — at the time — appeared to be strong sales growth.
It raised $561 million in its initial public offering last year. It had hoped to dethrone Starbucks in China by pursuing an aggressive strategy enticing customers with an app-based purchasing model, which prioritised takeaway and delivery options. By the end of 2019, it had more outlets of than Starbucks in China.
However, the company has been embroiled in a financial misconduct investigation that has sent the stock plummeting 89% over the past three months, led to the terminations of key executives, including the chief executive, and contributed to a delay in the company’s annual report.
The chain fired its chief executive Jenny Zhiya Qian and chief operating officer Liu Jian in May after an internal investigation into fabricated transactions.
Liu has been accused of faking 2.2 billion yuan (US$310 million) worth of sales in 2019, the company revealed in April, sending its shares into freefall.
Luckin Coffee announced Friday that its board of directors is moving to force out director and Chairman Charles Zhengyao Lu.
A meeting will be held July 2 to consider the resignation removal proposal, according to a company statement.
The proposal was requested by the majority of the board’s directors and based on findings and recommendations presented by a special committee, according to Luckin.
The Chinese coffee chain said the special committee based its recommendation on evidence gathered through the ongoing internal investigation and on Lu’s level of cooperation during the investigation.
It’s not clear what’s next for Luckin now that it will no longer have access to the stock market to raise new capital. Luckin said its operations would continue at its more than 4,000 stores across China.
However, bankruptcy rumors have been swirling in light of the scandal, according to reports