FAST NEWS: Luckin Coffee Emerges From Bankruptcy
The latest: Starbucks challenger Luckin Coffee (LKNCY.US), which roiled markets in 2020 when it admitted to massive accounting fraud, announced on Monday it has officially emerged from a bankruptcy reorganization.
Looking Up: Luckin Chairman and CEO Guo Jinyi said he is “confident that Luckin Coffee is well positioned for long term growth and creation of stakeholder value” following the official end of its restructuring.
Take Note: With the bankruptcy reorganization now complete, many believe that Luckin may try to upgrade its shares from their current over-the-counter (OTC) trading status to resume their listing on the Nasdaq main board. But the U.S. securities regulator may refuse such a request due to the company’s past fraud.
Digging Deeper: Luckin was founded in 2017 and quickly gained fame by saying it would challenge Starbucks in China using a high-tech formula of high-quality coffee available through app-only ordering. Luckin overtook Starbucks by rapidly opening new stores and went public in May 2019, less than two years after its founding. But less than a year later it was engulfed by an accounting scandal after admitting to fabricating 2.2 billion yuan ($345 million) in sales. It later fired its original management team and its new executives began to overhaul the company. Part of that overhaul included entering bankruptcy to reorganize the company’s debt and other financial obligations, including payment of a $180 million fine. The company has issued regular updates on its overhaul, including an announcement last month indicating it was close to emerging from bankruptcy.
Market Reaction: Luckin’s shares rose 3.7% on Monday. They are down about 6% this year.
Reporting by Doug Young
To subscribe to Bamboo Works free weekly newsletter, click here
