HONG KONG/NEW YORK (Reuters) – Luckin Coffee Inc (LK.O) said on Tuesday that Nasdaq Inc (NDAQ.O) has given it notice that it plans to delist it from the U.S. stock exchange a month after the Chinese coffee chain disclosed that some of its employees fabricated sales accounts.
FILE PHOTO: Jenny Qian Zhiya CEO of Luckin Coffee, and Charles Zhengyao Lu, non-executive chairman of Luckin Coffee, ring the Nasdaq opening bell with employees to celebrate the company’s IPO at the Nasdaq Market site in New York, U.S., May 17, 2019. REUTERS/Brendan McDermid/File Photo
The move underscores Nasdaq’s renewed focus on the auditing standards of companies on its bourse. This week it tightened its listings rules with an eye to curbing initial public offerings (IPOs) of Chinese companies that are closely held by insiders and are not transparent about their accounting, Reuters reported on Monday.
Luckin said in early April that as much as 2.2 billion yuan ($310 million) in sales last year were fabricated by its chief operating officer Jian Liu and other staff, who had been suspended while the company carried out its investigation.
The falsified numbers equate to about 40% of Luckin’s annual sales projected by analysts, according to Refinitiv IBES data.
In its delisting notice, Nasdaq cited public interest concerns raised by the fabricated transactions and Luckin’s failure to publicly disclose material information, the company said, confirming an earlier Reuters report.
Luckin plans to challenge the move before a Nasdaq hearing panel, and will remain listed until this delivers an outcome, most likely in the next two months, the company added.
Founded in June 2017, Luckin, a rival to Starbucks (SBUX.O) in China, had one of the most successful U.S. IPOs by a Chinese company last year, attracting interest from prominent U.S. investors, including long-only funds and hedge funds.
Luckin disclosed on May 12 that it had fired its chief executive officer, Jenny Zhiya Qian, who had led the company since November 2017, and Liu, who became COO in May 2018.
Shares of the Xiamen-headquartered company slumped more than 80% on April 2, the day the probe was revealed. Trading was halted on April 7.
Luckin has said it has been cooperating with and responding to inquiries from regulatory agencies in both the United States and China.
Reporting by Julie Zhu in Hong Kong and Echo Wang in New York; Editing by Chizu Nomiyama and Will Dunham