Where next for Luckin Coffee’s share price amid new fraud details?
Luckin Coffee’s delisting concerns are looking increasingly real following new reports of its chairman’s alleged involvement with an accounting fraud.
Share price of Nasdaq-listed Chinese coffeeshop chain Luckin Coffee opened 13% lower on Monday 08 June 2020, after it was reported that its chairman Lu Zhengyao may also have been directly involved in recent fraud charges that have plagued the company.
IG trading data showed that the stock plunged nearly US$1 per share to begin Monday’s session at US$4.79 each.
Luckin Coffee chairman also accused of committing fraud
Lu had allegedly instructed colleagues to commit accounting fraud in a series of emails that have been discovered by Chinese authorities, according to news site Caixin Global.
The report went on to add that China’s Ministry of Finance are currently in possession of evidence that could prove that Luckin Coffee had paid taxes on fabricated transactions, this is according to several people with proximity to the company’s internal investigation team.
Lu could possibly face criminal charges in China.
Gain access to Luckin Coffee and thousands of shares via IG's world-leading trading and investments platform. With CFDs (read about CFDs here), you can buy long or sell short on various asset classes depending on whether you think prices will rise or fall. Start today by opening a live or demo IG account.
Balance sheet manipulation dates back to second quarter of 2019
This is in addition to earlier developments that had revealed a degree of balance sheet manipulation by other senior company executives and employees.
On 07 April, Nasdaq halted trading of Luckin Coffee’s shares after it admitted in a US Securities and Exchange Commission filing that Jian Liu, chief operating officer and a director of Luckin Coffee Inc., and several of his employees, had ‘engaged in the fabrication of certain transactions’ amounting to around 2.2 billion Chinese yuan in aggregate sales that date back to the second quarter of 2019.
Lu had himself issued the following apology following the uncovering of the fraud: ‘I have been in deep pain and guilt over the past month. I again apologise to all the investors, staff and clients of Luckin for the terrible impact of the incident.’
The Board of Directors then terminated Jenny Zhiya Qian and Jian Liu from their positions of Chief Executive Officer and Chief Operating Officer on 12 May 2020 after further internal investigations. In addition, the company also placed six other employees who were involved in or had the knowledge of the fabricated transactions, on suspension or leave.
Luckin Coffee to request hearing on Nasdaq delisting notice
Following that, on 19 May 2020 – just a day prior to trading being resumed, the company announced that it received a written delisting notice from Nasdaq on 15 May over ‘public interest concerns’ regarding the fabricated transactions disclosed by the company.
Luckin Coffee had stated that it plans to request a hearing on the delisting. Hearings will typically be scheduled to occur approximately 30 to 45 days after the date of the hearing request.
For now, Luckin Coffee will remain listed on Nasdaq, pending the hearing’s outcome. However, there can be no assurance that the panel will grant the company’s request for continued listing, according to Nasdaq.
Despite the stream of controversy, Luckin Coffee’s share price was still able to rally over 50% last Friday 05 June, in line with improved market sentiments globally.
How to trade US stocks with IG
Are you bullish or bearish on Luckin Coffee and other Nasdaq stocks? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs in a few easy steps:
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get spreads from just 0.1% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets
- Forex
- Shares
- Indices
Prices above are subject to our website terms and agreements. Prices are indicative only
