Luckin Coffee’s Luck Is Running Out as Nasdaq Issues Another Delisting Notice

Shares of Luckin Coffee Inc. (LK) slumped 18% in premarket trading on Tuesday after the company announced it received a delisting notice from the Nasdaq last week for failing to file its annual report.

This is the second notice the company has received from the U.S. stock exchange in recent months. In May, the popular Chinese coffee chain, whose main competitor is Starbucks Corp. (NASDAQ:SBUX), was issued a citation after disclosing in April that one of its top executives fabricated as much as 2.2 billion yuan ($311.5 million) in 2019 sales. In that notice, the exchange’s listing qualifications staff cited the public’s concern about the fabricated transactions and the company’s “past failure to publicly disclose material information.”

As for the most recent notice, Luckin said in a press release that it has been unable to file its 2019 annual report due to delays caused by the Covid-19 pandemic as well as the ongoing internal investigation into the accounting scandal. However, the company said it is “working diligently” to find a way to file as soon as possible.

• LK 30-Year Financial Data
• The intrinsic value of LK
• Peter Lynch Chart of LK

In July, the company will also be holding a special general meeting to oust several of its directors, including Chairman Charles Zhengyao Lu, as a result of the fraudulent sales. Two directors, Thomas P. Meier and Tianruo Pu, have already resigned from the company’s board, but the reason for their departure may not be related to the incident itself.

One of company’s largest investors also headed for the exit. On April 2, the day the news broke, Steve Mandel (Trades, Portfolio)’s Lone Pine Capital revealed it dumped all 13.5 million shares it held, impacting its equity portfolio by -2.18%.

With an $805.01 million market cap, shares of Luckin Coffee, which went public in May 2019, were trading around $3.18 on Tuesday. GuruFocus estimates the stock has tumbled more than 85% year to date.

Disclosure: No positions.

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