Luckin Coffee eyes U.S. relisting as five-year turnaround from fraud scandal takes hold
Luckin Coffee is preparing to relist its shares in the U.S., its co-founder and CEO, Jinyi Guo, said at an entrepreneurs’ gathering earlier this month, five years after a $300 million accounting scandal derailed the coffee chain’s business. Speaking at a government-hosted event in the southeastern city of Xiamen, where Luckin Coffee is headquartered, Guo said that “under the municipal government’s guidance, we are actively pushing the process of relisting on a U.S. main board,” according to CNBC’s translation of his speech in Mandarin published by a Xiamen government-backed industry and commerce group. The relisting process, once completed, would help promote Xiamen’s reputation as an attractive venue for global business and investment, Guo added, while acknowledging the government’s support for Luckin’s turnaround. However, Guo did not provide details on the company’s progress toward a relisting. In an emailed statement to CNBC, a company spokesperson said that Luckin Coffee “remains committed to the U.S. capital markets, though we have no clear timeline for returning to the main board listing.” “Our current priority is focusing on strategy execution, concentrating on business operations and development, and enhancing our brand influence and market competitiveness,” the company said. Luckin was delisted from the Nasdaq stock exchange in June 2020 after revelations that the coffee chain had fabricated over $310 million in revenue for 2019. Six months later, Luckin agreed to pay a $180 million penalty to settle accounting fraud charges with the U.S. Securities and Exchange Commission. Guo took over the helm as the new CEO in 2020 , following the ouster of co-founder and former chairman Charles Zhengyao Lu in the aftermath of an internal fraud investigation. In 2022, Luckin announced that it had completed the restructuring of its financial debt and emerged from Chapter 15 bankruptcy proceedings. Its shares have continued to trade over-the-counter in the U.S. since its delisting, giving the company a market valuation of approximately $10.9 billion as of Tuesday night. For comparison, Starbucks ‘ operations in China were recently valued at $4 billion on a cash-free and debt-free basis, excluding Starbucks’ licensing of its brand and intellectual property. Once on the brink of collapse, the coffee chain has staged an extraordinary comeback, with its budget drinks attracting a growing number of customers, overtaking Starbucks as China’s largest coffee retailer in 2023 . Luckin has also taken on Starbucks on its home turf , opening two new stores in New York City in July this year. The turnaround was underpinned by the backing of private equity fund Centurium Capital, its largest shareholder , which doubled down on its investment following the 2020 scandal to help Luckin cover mounting legal fees and fines, and installed its own team to revamp the business. In April this year, David Li, founder of Centurium Capital, became the firm’s chairman — a move seen by some in the industry as signaling Luckin’s plans to accelerate its relisting in the U.S. Media reports emerged as early as 2022 that the coffee chain was planning to relist on the Nasdaq. However, the company had rebutted the reports, with Guo most recently stating on an investor call in October last year that Luckin did not have a clear timeline for an uplisting . Any new overseas listing by a Chinese company must now be filed with the China Securities Regulatory Commission under rules that took effect in 2023 . It is unclear if Luckin has approached the regulator about its plan to relist in the U.S. Luckin may also face regulatory hurdles in meeting U.S. SEC financial disclosure requirements. U.S.-listed companies are required to have their financial statements audited by accounting firms registered with and overseen by the Public Company Accounting Oversight Board, or PCAOB. In July, the PCAOB permanently revoked the license of Centurion ZD CPA & Co., a former auditor for Luckin Coffee, for violating audit rules for companies operating in China. Regulators said the firm failed to identify and assess fraud risks in Luckin’s 2021 financial reporting. Luckin has hired BDO China Shu Lun Pan Certified Public Accountants LLP as its auditor since 2022, according to company filings . Centurium Capital and the China Securities Regulatory Commission did not immediately respond to CNBC’s requests for comment. In the second quarter of this year, Luckin’s revenue jumped 47.1% from a year earlier to $1.7 billion, according to its filing, with 26,206 stores globally as of the end of June. — CNBC’s Evelyn Cheng contributed to this report.
