Scandal-plagued Luckin Coffee secures US$250 million lifeline
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Luckin Coffee, the scandal-plagued Chinese coffee shop chain, secured a $260 million investment from existing shareholders Centurium Capital and Joy Capital. It also replaced its independent auditor.
This will help Luckin satisfy a $180 million settlement struck last year with the SEC, which had accused Luckin of faking retail sales figures. The company went public on the Nasdaq less than two years ago at a $4.3 billion valuation but was later delisted because of the accounting fraud.
The investment is structured as convertible preferred stock, with an option for Centurium and Joy to invest an additional $150 million.
The bottom line, Luckin was supposed to be China’s answer to Starbucks, but so far has been closer to China’s answer to Enron.
Questions & Answers
Q.What is the primary reason Luckin Coffee needed this investment?
What is the primary reason Luckin Coffee needed this investment?
The investment will help Luckin Coffee meet a $180 million settlement agreed last year with the SEC. The SEC had accused the company of fabricating retail sales figures.
Q.What happened to Luckin Coffee's stock market listing after the scandal?
What happened to Luckin Coffee's stock market listing after the scandal?
Luckin Coffee was delisted from the Nasdaq due to the accounting fraud. The company had only gone public less than two years before its delisting.
Q.Could Centurium Capital and Joy Capital invest further in Luckin Coffee?
Could Centurium Capital and Joy Capital invest further in Luckin Coffee?
Yes, Centurium Capital and Joy Capital have an option to invest an additional $150 million. This option is part of the current convertible preferred stock structure.
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