Luckin Coffee Inc.
Native name
瑞幸咖啡
TypePublic company
OTC Pink Limited: LKNCY (formerly Nasdaq: LK, but delisted 29 Jun 2020)
IndustryCoffee shop
FoundedOctober 2017 (2017-10)
Beijing, China
Founders
Headquarters
Xiamen, Fujian
,
China
Number of locations
  • 9,351 total
  • 6,310 Luckin Coffee
  • 3,041 partnerships
[1] (2023)
Area served
China
Singapore[2]
Key people
  • Reinout Schakel (CFO)
Jinyi Guo (Chairman) and (CEO)[3][4]
Products
  • Coffee beverages
  • tea
RevenueFY 2020 $618M USD [5]

H1 2021 $492M USD [6] Q3 2021 $367M USD [7]

Q1 2023 $646M USD [8]
OwnerCenturium Capital
Websiteluckincoffee.co
Footnotes / references
[9][10][11]

Luckin Coffee Inc. (Chinese: 瑞幸咖啡; pinyin: Ruìxìng Kāfēi; Pe̍h-ōe-jī: Suī-hēng Ko-pi) is a Chinese coffee company and coffeehouse chain. It was founded in Beijing in 2017. As of March 2023, it managed 9,351 stores which include 6,310 self-operated stores and 3,041 partnership stores. On June 5, the total Luckin coffee store number reached 10,000. Monthly active customers numbers reached 500 millions in June 2022. The company operates shops, stores, and kiosks that offer coffee, tea, and food.[12] Customers need to download an app to order and pay for drinks online.[13][14] Luckin is currently headquartered in Xiamen. Luckin Coffee quickly expanded over the years and outnumbered the number of Starbucks stores in China by 2019.[15]

In April 2020, the company revealed that it had inflated its 2019 sales revenue by up to US$310 million. It resulted in the stock price crashing and several executives being fired.[16] Trading was suspended and the company was delisted from NASDAQ on 29 June 2020.[17] The company filed for Chapter 15 bankruptcy in the US in February 2021.[18] In December 2021, Luckin Coffee received court approval from a federal judge in Manhattan to restructure $460M worth of debt and to settle a number of class-action lawsuits over the fabricated sales figures.[19][20] In 2022, The Wall Street Journal had reported that the company has emerged from bankruptcy after completing the restructuring of its financial debt under United States code, and also replaced most of its top management who were held accountable for the earlier fraud. Consequently, Luckin Coffee's shares had rebounded and had reached more than 80% in gains by the end of 2022, giving the company a valuation of about $4.4 billion.[21]

History

A Luckin Coffee retail store in Hangzhou (2019)

2017–2019: Founding

Luckin Coffee was incorporated in October 2017, and by January 2018 had opened its first shops in Beijing and Shanghai.[12][22] The company announced the completion of Series A financing to a total of US$200 million in July 2018 backed by Centurium Capital, Joy Capital and GIC.[23]

By October 2018, the company had opened 1300 stores, surpassing the number of Costa Coffee stores to become the second-biggest coffee brand in China.[24] Luckin Coffee also signed a strategic cooperation agreement with Tencent.[25][26] Much of Luckin's expansion was fueled by an aggressive marketing strategy which saw the company spend three times as much as it earned to feed its growth.[13]

In January 2019, the company announced that they planned to open 2500 new stores and surpass Starbucks to become the biggest coffee brand in China.[27][28] Luckin also gained exposure in the US stock market, applying to the Nasdaq[29] and starting to trade at $17 a share.[30] After reaching $25.96 on the first day, the stock dropped to $16 on its second day of trading.[31][32]

2020–2021: Accounting scandal

In early January 2020, the company raised more capital through a share placement and a convertible bond sale, with worth totalling $821 million as it sought to expand into deploying vending machines that would serve fresh hot beverages and snacks. It was also offering a $400 million five-year convertible bond separately.[33]

On 31 January 2020, short-selling firm Muddy Waters Research published an anonymous 89-page report on Twitter, claiming that Luckin Coffee had falsified financial and operational figures.[34] The report claimed that the number of items sold per store was inflated by at least 69% in the third and by 88% the fourth quarter of 2019, supposedly backed by 11,200 hours of video footage. Before the U.S. stock market opening on 3 February 2020, Luckin Coffee responded by formally denied all allegations made in the report.[35]

On 2 April 2020, the company announced that an internal investigation found that its chief operating officer, Jian Liu, had fabricated the company's 2019 sales by "around RMB2.2 billion" (US$310 million).[36][37] The next day, the China Securities Regulatory Commission said that it would investigate the company for fraud.[38] On 8 April, the U.S. stock market halted trading on all Luckin shares over the fraud probe.[39] In the month of April, the company's stock fell by over 80%.[40] In mid-April 2020, American investment bank Goldman Sachs announced that it would seize and sell the Luckin stock holdings of the company's chairman, Lu Zhengyao, after he defaulted on a $518 million margin loan.[40] The $400 million bond offered just prior to Muddy Waters Research's release of the anonymous report also had imploded by 24 April 2020, with the notes selling as low as for 10 cents on the dollar value of bond.[41]

On 15 May the company received a delisting notice from NASDAQ.[42] After over a month of being halted for trading, the companies stock was able to be traded again on 20 May 2020.[43] On 28 May, shares of the company plummeted more than 20% after The Wall Street Journal released a report claiming that firms linked to the company's chairman and controlling shareholder played a central role in its accounting scandal.[44] On 29 June 2020, the company suspended trading on NASDAQ and filed for delisting, after the exchange ordered the company to delist.[45] Banks including Credit Suisse had won court orders in Cayman Islands on 22 June 2020, and in British Virgin Islands on 9 July 2020, to wind up Lu's controlling entities of Luckin Coffee Inc for liquidation, after Lu's margin loan default.[46][47] The company thereby entered into a state of provisional liquidation.[48] In September 2020, China's markets regulators fined a group of firms including Luckin Coffee for a combined $8.98 million in relation to Luckin's falsification of financial and operational figures.[49] On 16 December 2020, the US SEC settled the accounting fraud case with the company for $180 million. The company agreed to the settlement without admitting or denying the SEC allegations which include defrauding investors by materially misstating revenue and expenses, inflating its growth rates and understating its losses.[50] On 5 February 2021, the company filed for Chapter 15 bankruptcy in New York, less than a year after the company said that more than a quarter's worth of business may have been faked.[51] By 22 September 2021, the company revealed its plans to restructure.[48][52] On 30 September 2021, Luckin Coffee settled a US class-action lawsuit to resolve investors' claims for $187.5 million.[53] In December 2021, Luckin received court approval to restructure a large amount of debt and settle a number of lawsuits over fabricated sales figures.[19]

2022–Present: Comeback

According to The Wall Street Journal, Luckin Coffee emerged from bankruptcy in March 2022 and has replaced most of its top management and ousted its former chairman, chief executive and other employees who carried out the earlier fraud.[54] Additionally Luckin Coffee is now being run by a Chinese private equity firm Centurium Capital, who had earlier made capital injections worth $240 million into the company in the spring of 2021.[55][56] The new CEO, Jinyi Guo, shifted the company's focus from burning through money to refining operations, with a renewed emphasis on physical store-level operations, building product lines, and reducing operating costs. This essentially repositioned Luckin's business model.[57] As a result, Luckin shares have gained more than 80% by the end of 2022, giving the company a valuation of about $4.4 billion. The company posted an operating loss of $85 million in 2021 and reported net profit of $108 million for the year after booking a one-off accounting gain, as reported by The Wall Street Journal[54].

See also

References

  1. ↑ "Luckin Coffee Inc. Announces First Quarter 2023 Financial Results". Yahoo News. Retrieved 9 May 2023.
  2. ↑ "China's Luckin Coffee makes Singapore debut at Marina Square, Ngee Ann City". The Straits Times. 31 March 2023. Retrieved 31 March 2023.
  3. ↑ Pham, Sherisse (14 July 2020). "Luckin Coffee ousts chairman, names new CEO". CNN Business.
  4. ↑ "Jinyi Guo, chairman and chief executive officer, Luckin Coffee". www.topionetworks.com.
  5. ↑ Luckin Coffee FY 2020 Financials (21 September 2021). "Luckin Coffee FY 2020 Financials". Luckin Coffee investor relations.{{cite news}}: CS1 maint: numeric names: authors list (link)
  6. ↑ Luckin Coffee H1 2021 Financials (21 October 2021). "Luckin Coffee H1 2021 Financials". Luckin Coffee investor relations.{{cite news}}: CS1 maint: numeric names: authors list (link)
  7. ↑ Luckin Coffee Q3 2021 Financials (9 December 2021). "Luckin Coffee Q3 2021 Financials". Luckin Coffee investor relations.{{cite news}}: CS1 maint: numeric names: authors list (link)
  8. ↑ "Luckin Coffee Inc. Announces First Quarter 2023 Financial Results". Yahoo News. Retrieved 9 May 2023.
  9. ↑ Luckin Coffee (22 April 2019). "Form F-1 - Luckin Coffee Inc". Retrieved 2 May 2020. (filing with the Securities Exchange Commission)
  10. ↑ "Luckin Coffee Inc. Announces Unaudited ThirdQuarter 2019 Financial Results". Luckin Coffee. 13 November 2019. Retrieved 2 May 2020.
  11. ↑ "Luckin Coffee, China's Newest Unicorn, is Challenging Starbucks' Market Stranglehold". Radiichina.com. 26 July 2018. Retrieved 30 December 2018.
  12. 1 2 "China's Luckin Coffee takes on Starbucks". CNBC. Retrieved 28 December 2018.
  13. 1 2 Mary Hui (14 May 2019). "What you can eat and drink at Starbucks's China rival". Quartz. Retrieved 3 July 2019.
  14. ↑ "瑞幸打败不了星巴克，但未必是下一个ofo". 华尔街见闻. 15 January 2019. Archived from the original on 16 April 2019.
  15. ↑ Peng, Zhe; Yang, Yahui; Wu, Renshui (1 June 2022). "The Luckin Coffee scandal and short selling attacks". Journal of Behavioral and Experimental Finance. 34: 100629. doi:10.1016/j.jbef.2022.100629. ISSN 2214-6350. S2CID 246415394.
  16. ↑ Yang, Jing (28 May 2020). "Behind the Fall of China's Luckin Coffee: a Network of Fake Buyers and a Fictitious Employee". Wall Street Journal – via www.wsj.com.
  17. ↑ "China's scandal-hit Luckin Coffee ousts chairman". Asia Times. 14 July 2020. Retrieved 14 July 2020.
  18. ↑ Ghosh, Palash. "Luckin Coffee Files For Bankruptcy Seven Months After Nasdaq Delisting". Forbes. Retrieved 8 February 2021.
  19. 1 2 Church, Steven (16 December 2021). "Luckin Coffee Wins U.S. Approval for $460m Debt Restructuring". Bloomberg Law. Bloomberg L.P. Retrieved 18 December 2021.
  20. ↑ "Luckin Coffee in $175 mln class action settlement over accounting fraud". Reuters.
  21. ↑ Yang, Jing (7 November 2022). "Hedge-Fund Manager Who Helped Expose Luckin Coffee's Fraud Bets on Chinese Chain's Comeback". Wall Street Journal. Retrieved 9 May 2023.
  22. ↑ "This coffee company thinks it can beat Starbucks in China". CNN. 28 December 2018. Retrieved 28 December 2018.
  23. ↑ 完成2亿美元A轮融资 瑞幸咖啡做好了长期亏损准备？ 手机金融界，11 July 2018
  24. ↑ "咖啡巨头现诸神之战 中国市场成关键". 观察者. 7 September 2018.
  25. ↑ 瑞幸咖啡与腾讯签署战略合作 中国咖啡市场及发展前景分析 凤凰网，7 September 2018
  26. ↑ 中国咖啡市场白热化 瑞幸咖啡与腾讯达成战略合作 搜狐网，6 September 2018
  27. ↑ "瑞幸咖啡今年计划新开2,500家门店 取代星巴克在中国龙头地位". Reuters. 2 January 2019.
  28. ↑ Maggie Fitzgerald (16 June 2019). "Wall Street sees major growth potential for Luckin in untapped Chinese coffee market". CNBC. Retrieved 17 June 2019.
  29. ↑ "中国星巴克劲敌-瑞幸咖啡申请美国上市". 23 April 2019.
  30. ↑ Lucas, Amelia; Picker, Leslie (16 May 2019). "Starbucks' China challenger Luckin Coffee prices IPO at $17 a share". CNBC. Retrieved 17 June 2019.
  31. ↑ Janet Freund (23 May 2019). "Luckin Coffee Burns Investors With 39% Plunge". Bloomberg L.P. Retrieved 3 July 2019.
  32. ↑ Paul R. La Monica (17 May 2019). "Luckin Coffee surges in Wall Street debut". CNN. Retrieved 3 July 2019.
  33. ↑ "Luckin Coffee seeks more of China market, launches equity deals worth $821 million". Reuters. 8 January 2020. Retrieved 21 December 2021.
  34. ↑ Pisani, Bob (3 April 2020). "Luckin Coffee is a painful reminder of 'the extreme fraud risk' of some China-based companies". CNBC.com. Archived from the original on 4 April 2020. Retrieved 1 November 2023.
  35. ↑ "Luckin Coffee Responds to Anonymous Report Containing Misleading and False Allegations" (Press release). 3 February 2020 – via Bloomberg.
  36. ↑ Lucas, Amelia (2 April 2020). "Shares of China's Luckin Coffee plummet 80% after investigation finds COO fabricated sales". CNBC.
  37. ↑ "Luckin Coffee Announces Formation of Independent Special Committee and Provides Certain Information Related to Ongoing Internal Investigation". luckincoffee.com (Press release). 2 April 2020. Retrieved 4 April 2020.
  38. ↑ Zhu, Julie; Zhang, Zoey (3 April 2020). "China probes alleged fraud at Luckin Coffee, banks review IPO work". Reuters.
  39. ↑ Lucas, Amelia (8 April 2020). "Luckin Coffee's stock has been halted for pending news since Tuesday". CNBC. Retrieved 20 April 2020.
  40. 1 2 Lin, Connie (12 April 2020). "Embattled Luckin Coffee sees wild surge as customers scramble to cash in on free drink vouchers". Fast Company. Retrieved 12 April 2020.
  41. ↑ "Luckin bondholders stand to lose US$400 million amid accounting scandal". South China Morning Post. 24 April 2020. Retrieved 21 December 2021.
  42. ↑ Kilgore, Tomi. "Luckin Coffee gets delisting notice from Nasdaq". MarketWatch. Retrieved 20 May 2020.
  43. ↑ Garcia, Tonya. "Luckin Coffee began trading again, but it will have to close stores and investors will be 'wiped out,' says Quo Vadis". MarketWatch. Retrieved 20 May 2020.
  44. ↑ Tenebruso (TMFGuardian), Joe (28 May 2020). "Why Luckin Coffee Stock Plunged Today". MotleyFool. Retrieved 29 May 2020.
  45. ↑ Yang, Jing (27 June 2020). "Luckin Coffee Drops Nasdaq Appeal; Shares to Be Delisted". Wall Street Journal. ISSN 0099-9660. Retrieved 14 July 2020.
  46. ↑ "Banks Win Right to Liquidate Millions in Shares of Luckin -- WSJ | MarketScreener". www.marketscreener.com. 22 June 2020. Retrieved 21 December 2021.
  47. ↑ "Charles Lu Zhengyao loses control of Luckin Coffee shares following a BVI court ruling". Comunicaffe International. 15 July 2020. Retrieved 21 December 2021.
  48. 1 2 "Hong Kong, US hedge funds bank on Luckin Coffee revival to collect payouts". South China Morning Post. 22 September 2021. Retrieved 21 December 2021.
  49. ↑ "China fines Luckin Coffee and linked firms a total of $9 million". Reuters. 22 September 2020. Retrieved 22 September 2020.
  50. ↑ FT Staff (17 December 2020). "Luckin Coffee to pay $180m in accounting fraud settlement". FT. Retrieved 4 February 2021.
  51. ↑ Jordan Valinsky (5 February 2021). "Luckin Coffee files for bankruptcy in the US". CNN. Retrieved 5 February 2021.
  52. ↑ "Luckin Coffee announces scheme of arrangement in compliance with RSA". Comunicaffe International. 22 September 2021. Retrieved 21 December 2021.
  53. ↑ "Luckin Coffee agrees to $187.5 million settlement with U.S. investors". www.vendingmarketwatch.com. 30 September 2021. Retrieved 21 December 2021.
  54. 1 2 Yang, Jing (7 November 2022). "Hedge-Fund Manager Who Helped Expose Luckin Coffee's Fraud Bets on Chinese Chain's Comeback". Wall Street Journal. Retrieved 2 May 2023.
  55. ↑ "Luckin Coffee Closes in on 10,000 Shops | QSR magazine". www.qsrmagazine.com. 20 April 2023. Retrieved 9 May 2023.
  56. ↑ Yang, Jing (27 January 2022). "China's Centurium Capital Gains Control of Luckin Coffee". Wall Street Journal. Retrieved 9 May 2023.
  57. ↑ BranDay (6 March 2023). "Luckin's Rebirth Secret". BranDay. Retrieved 2 May 2023.
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