After Scandal Almost Tore It Down, Luckin Considers Relisting Shares In US After Soaring Success – CoffeeTalk

Luckin Coffee is working towards relisting its shares in the U.S. after a significant accounting scandal five years ago that resulted in a $300 million loss. CEO Jinyi Guo recently announced this effort at an event in Xiamen, where the company is based, noting the support from the municipal government and emphasizing the positive impact a relisting would have on Xiamen’s global business image. However, no specific timeline for relisting was provided. A company spokesperson reiterated Luckin’s commitment to U.S. capital markets but also mentioned a lack of clarity regarding a timeline for returning to the main board listing. The company’s strategy currently centers on enhancing operational effectiveness and brand recognition.

Luckin was delisted from the Nasdaq in June 2020 after it was revealed that it had overstated its revenue by more than $310 million for the year 2019. Following this, Luckin faced severe penalties, agreeing to a $180 million settlement with the U.S. Securities and Exchange Commission for accounting fraud. Guo, who became CEO in 2020 after prior leadership was ousted, has overseen a significant turnaround. In 2022, Luckin completed restructuring its financial debts and emerged from Chapter 15 bankruptcy. Despite its delisting, the company’s shares traded over-the-counter in the U.S., giving it a valuation of around $10.9 billion, while Starbucks’ operations in China are valued at $4 billion.

Once nearing collapse, Luckin Coffee has experienced a surprising recovery, overtaking Starbucks as the largest coffee retailer in China in 2023, partly due to its budget-friendly offerings and expansion strategies, including new store openings in New York City. The turnaround was heavily supported by Centurium Capital, its primary investor, which significantly increased its investment post-scandal to assist with legal costs and appointed new management. David Li from Centurium was recently appointed as chairman, a move interpreted as a strategy to expedite relisting movements.

Although there have been rumors about Luckin’s plans to relist on the Nasdaq since 2022, previous responses from the company denied having a definitive timeline. An essential aspect of the new regulatory framework necessitates that any overseas listing by a Chinese firm must be sanctioned by the China Securities Regulatory Commission, which began in 2023. It is uncertain if Luckin has initiated communication with this regulator regarding its relist plans.

Additionally, Luckin must navigate various regulatory challenges, particularly concerning U.S. Securities and Exchange Commission mandates on financial disclosures. While U.S. firms are required to have their financial statements audited by PCAOB-registered firms, Luckin’s former auditor was barred due to non-compliance with actuarial rules. Luckin has since engaged BDO China Shu Lun Pan as its auditor since 2022. The company saw a revenue increase of 47.1% year-over-year in the second quarter of the year, hitting $1.7 billion and operating 26,206 stores globally as of the end of June. This report was also co-authored by Evelyn Cheng from CNBC.

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