Picture of a cup of coffee at a Luckin Coffee on January 14, 2019. – When Starbucks came to China two decades ago it promised to open a new store every 15 hours. Now a homegrown rival, Luckin Coffee, plans to build a high tech-driven shop every three and a half hours to dethrone the US giant. The Chinese upstart is burning through millions of dollars to lure customers with steep discounts, challenging Starbucks’ dominance by targeting office workers and students who prefer to have their java on-the-go or delivered to their doorstep. (Photo by FRED DUFOUR / AFP) (Photo credit should read FRED DUFOUR/AFP/Getty Images)
Sometimes you can’t just get a [L]uckin’ break.
After announcing this morning that it is ending its fight to stay listed on Nasdaq, China-based coffee chain and delivery company Luckin Coffee announced that it is requiring that its chairman, Lu Zhengyao, resign in a filing with the SEC.
Luckin Coffee will unluckin’ly delist from Nasdaq following fraud allegations
It also announced in its SEC filing that the chairman has requested the firing of independent director Sean Shao through a shareholders resolution, which will be voted upon at a shareholders meeting to be held on Sunday, July 5th.
It’s getting ugly at Luckin, which is struggling to turnaround in the aftermath of revelations of a $300 million accounting fraud that has seen its stock price plummet in recent months. Shao has been leading the board’s independent investigation over the accounting irregularity.
Luckin Coffee’s board initiates investigation into $300M potential fraud
Now, at a shareholders meeting, the board will be up for grabs, with investors in the company (yes, there are still investors!) choosing who to keep and who to fire in a devolving case of corporate governance run amok.
In addition to voting on several current directors of the company, shareholders will also vote on installing two new independent directors, Zeng Ying and Yang Jie, who have long-time business and legal backgrounds.
We had previously known about the extraordinary shareholders meeting, but now the company has upped the ante, by voting to force out the chairman by July 2 — three days before the shareholders meeting is scheduled to take place.
Honestly, at this point, it’s impossible to say what comes next. But what I can say is that Luckin is currently trading down 54% at close this Friday,