Luckin Coffee settles deal to end class action suit
Luckin Coffee Inc on Tuesday announced it had reached a settlement in the class-action against it over an accounting scandal.
The company posted three statements on Tuesday, saying it "had entered into a binding term sheet with the Lead Plaintiffs in the provisionally certified class action," to fully resolve all claims that have been or could be filed on behalf of a class of purchasers from May 17, 2019, through July 15, 2020, that have been certified for settlement purposes.
According to the Term Sheet it inked to, the settlement will be calculated based on a Global Settlement Amount of US$187.5 million, which will be reduced on a pro-rata basis based on the valid opt-out notices received.
"Upon final approval, this settlement will resolve a significant contingent liability and enable Luckin Coffee to move forward with a greater focus on our operations and the execution of our strategic plan," said Guo Jinyi, chairman and chief executive officer of Luckin Coffee.
The coffee chain also launched a scheme of arrangement to restructure its US$460 million 0.75 percent Convertible Senior Notes due in 2025.
The scheme, if sanctioned, will implement the restructuring envisaged by the Restructuring Support Agreement of March 16, 2021, amended on September 1.
The company imploded in April 2020, less than a year after its Nasdaq listing, as it was exposed as fabricating certain transactions from the second quarter to the fourth quarter of 2019, during which certain costs and expenses were substantially inflated.
It finally released its annual report for 2020 on Tuesday.
While later than expected, it did post a net revenue of 4.03 billion yuan (US$618.1 million), an increase of 33.3 percent year on year despite the impact of COVID-19 in 2020.
It attributed the increase to "the increased average selling price for Luckin Coffee's high-quality products."
"Luckin Coffee continues to make progress on returning the company to normalized financial reporting," Guo said.
"In 2020, we delivered strong revenue growth and improvements in profitability.
"We have continued to expand and enhance our results in 2021, and our team remains dedicated to delivering high quality products and services for our customers and-executing on our strategic plan for the benefit of all stakeholders."
By December 31, 2020, the cumulative number of transacting customers was over 64.9 million, compared with 40.6 million as of the end of 2019.
And the coffee chain had 3,929 self-operated stores in 56 cities in China and 874 partnership stores as of the end of 2020.
The company's stock, now traded on the over-the-counter Pink Open Market after being delisted from Nasdaq for the scandal, on Tuesday posted a 3.44 percent rise at the closing bell, lifting its market value to US$4.349 billion.