Embattled coffee chain Luckin Coffee Inc (瑞幸咖啡) has decided against ousting its founder and chairman, despite an internal investigation concluding that last year’s revenue included millions of dollars in fake sales.
The massive financial scandal has already cost the company two top executives, caused shares to plummet more than 70 percent and put its billionaire founder Charles Zhengyao Lu (陸正耀) in the line of fire — and would see it delisted from the NASDAQ in New York.
However, the directors decided Lu would nevertheless remain as chairman of the board, the company said in a notice, a day after an internal probe found its net revenue last year was inflated by about 2.12 billion yuan (US$300 million).
Photo: Reuters
A proposal to oust Lu failed to get the necessary two-thirds majority vote on Thursday, Luckin said in a filing to the US Securities and Exchange Commission.
The company’s shares went into freefall after it revealed in April that a top officer might have faked billions of yuan of sales.
The chain has since fired chief executive Jenny Zhiya Qian (錢治亞) and chief operating officer Liu Jian (劉劍).
On Wednesday, Luckin said in a separate filing that a special committee investigation had found the fabrication of sales traced back as early as April last year.
Apart from the inflated revenue, Luckin’s costs and expenses last year were also found to be inflated by 1.34 billion yuan.
The committee’s recommendations — which led to Qian and Liu’s removals — brought about a proposal to oust Lu as well.
While it eventually failed to garner enough support to remove Lu, the board earlier announced its decision to fire another 12 employees involved in the fake transactions.
Luckin suspended trading on Monday and is to delisted from the NASDAQ by the end of next week, having been asked to do so by the exchange.
Lu must still face a vote of confidence by shareholders tomorrow at an extraordinary general meeting, which also proposes axing several more directors.
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