Luckin Coffee announced Friday that the company had withdrawn its request for a Nasdaq hearing, a months after the stock market announced that it was issuing the China-based coffee company a delisting notice following a fraud scandal that resulted in fabricated financial numbers. As a result, the company’s shares will be removed from the Nasdaq stock market on June 29 at the start of the business day, just 13 months after the company had initially made its debut on the stock market, with an IPO worth $561 million.
On the same day that they announced their appeal withdrawal, the company announced that Luckin’s board of directors, had submitted a proposal to require its chairman of the board, Charles Zhengyao Lu, to resign. The proposal would be voted on July 5 during an emergency general meeting of shareholders, and if approved, Zhengyao Lu would be one of a string of Luckin Coffee executives that have resigned in the wake of the scandal, including the company’s CEO Jenny Zhiya Qian, COO Jian Liu, senior vice president Wenbao Cao and vice president Gang Wu.
Luckin Coffee’s first wave of resignations occurred in May after news broke of the fraud investigation against the company. In January, activist short-seller Muddy Waters received an anonymous 89-page report with evidence that the high-performing Luckin Coffee had been fabricating financial and operating numbers, with high-ranking executives in the company involved in fabricating as much as $310 million of its 2019 sales.
A week after Luckin Coffee responded to the investigation against the company, Nasdaq issued the company a delisting notice, for reasons of “public interest concerns as raised by the fabricated transactions disclosed by the company” and “the company’s past failure to publicly disclose material information, citing a business model through which the previously disclosed fabricated transactions were executed.”
Before news of the fraud investigation broke, Luckin Coffee was considered a major coffee competitor to Starbucks and was one of the fastest growing coffee brands in China.
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