The latest: Chinese coffee chain Luckin Coffee Inc. (LKNCY.US) said in a statement Monday that it is not seeking a Hong Kong listing at this time, refuting a media report that it was considering such a plan. It added it remains committed to U.S. capital markets where its stock is currently traded over-the-counter (OTC).
Looking up: The company said it will continue to monitor capital market developments and evaluate all avenues to deliver value to its stakeholders, implying it has not completely ruled out a potential future listing in Hong Kong.
Take Note: By sticking with U.S. capital markets, the company could face greater regulatory risks than it might by listing in the more investor friendly Hong Kong. That could include a delisting risk, after Luckin was recently added to a list of companies that faced such risk due to failure to comply with the U.S. Holding Foreign Companies Accountability Act (HFCAA).
Digging Deeper: Founded in 2017, Luckin has attracted customers with its premium coffee and minimalist stores, and has grown rapidly to surpass its main rival Starbucks (SBUX.US) in terms of stores in China. It listed on the Nasdaq in May 2019, but was delisted a year later and saw its shares moved to the OTC market after it admitted to fabricating 2.2 billion yuan ($330 million) in sales. Although Luckin is striving to re-list on the Nasdaq, its own history of fraud, coupled with current U.S.-China frictions, may make it difficult for the U.S. securities regulators to approve such a request.
Market Reaction: Luckin shares fell 3.9% to $6.36 on the OTC market on Tuesday, near the low end of their 52 week range.
Translation by Jony Ho
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