Luckin falls to new low as trading resumes

Shares in Luckin Coffee Inc slumped almost 40 percent to a record low as they resumed trading after more than a month’s halt on Wednesday, and a day after the Chinese coffee chain said it received a delisting notice from Nasdaq.

Luckin said on Tuesday that Nasdaq had served a notice that it plans to delist it from the US stock exchange a month after the company disclosed that some of its employees fabricated sales accounts.

Luckin said in early April that as much as 2.2 billion yuan (US$310 million) in sales last year were fabricated by its chief operating officer Liu Jian and other staff, who have been suspended. The falsified numbers equate to about 40 percent of Luckin’s annual sales projected by analysts, according to Refinitiv IBES data.

In its delisting notice, Nasdaq cited public interest concerns raised by the fabricated transactions and Luckin’s failure to publicly disclose material information, the company said.

Luckin plans to challenge the move before a Nasdaq hearing panel, and will remain listed until this delivers an outcome, most likely in the next two months, the company added.

The chairman of Luckin Coffee apologized over its accounting fraud, saying he is “deeply disappointed and regrets” the delisting decision.

“Nasdaq asked the company to withdraw from the market without waiting for the final investigation result, which was unexpected.

“I have been in deep pain and guilt over the past month,” said Lu in a statement published on Chinese social media platform WeChat on Wednesday. “I again apologize to all the investors, staff and clients of Luckin for the terrible impact of the incident.”

Lu said he never intended to defraud investors and only wanted to build good companies and create value for society.

Luckin disclosed on May 12 that it had fired its chief executive officer, Qian Zhiya, who had led the company since November 2017, and Liu, who became COO in May 2018.

Shares of the Xiamen-headquartered company slumped more than 80 percent on April 2, the day the probe was revealed. Trading was halted on April 7.

Luckin has said it has been cooperating with and responding to inquiries from regulatory agencies in both the United States and China. Founded in June 2017, Luckin had one of the most successful US IPOs by a Chinese company last year, with a market value of some US$4 billion.