Luckin Coffee Inc (瑞幸咖啡), a Starbucks Corp rival in China, on Saturday said it would delist from the NASDAQ following a massive fraud scandal that sent its share price plummeting.
The chain last month fired chief executive officer Jenny Zhiya Qian (錢治亞) and chief operating officer Liu Jian (劉劍) after an internal investigation into fabricated transactions.
Liu has been accused of faking 2.2 billion yuan (US$310.8 million) worth of sales for last year, the company revealed in April, sending its shares into free fall.
“Luckin Coffee will suspend trading on the NASDAQ on June 29 and file for delisting,” the company said, after abandoning plans to appeal a NASDAQ order to delist.
Luckin said its operations would continue at its more than 4,000 stores across China.
The chain was launched in 2017 and raised US$561 million in its initial public offering less than two years later. Shares soared by 50 percent when it began trading.
It had hoped to dethrone Starbucks in China by pursuing an aggressive growth strategy, enticing customers with an app-based purchasing model which prioritized takeaway and delivery options, and generous mobile coupons.
By the end of last year, it had more outlets than Starbucks and investors had touted the company’s potential to go global.
Meanwhile, the company’s board is to require chairman Charles Zhengyao Lu (陸正耀) to resign, adding to the fallout from the accounting scandal.
A majority of directors requested the proposal, based on the findings of the internal investigation, Luckin said in a filing. The board is to hold a special meeting on the matter on July 2.
Last month, lenders led by Credit Suisse Group AG targeted the family assets of Lu as they tried to recoup losses on more than US$500 million in soured margin loans.
They won a court order to liquidate two holdings — Primus Investments Fund and Mayer Investments Fund — which hold shares in Luckin and are ultimately controlled by the Lu family.
Luckin’s fall from grace has made it a poster child for concerns about Chinese corporate governance, fueling a debate in Washington over the extent to which US money and capital markets should be made accessible to firms from a growing geopolitical rival.
The US Senate on Wednesday approved legislation that could lead to the US barring some Chinese companies from US exchanges.
Additional reporting by Bloomberg
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