Chinese coffee chain operator Luckin Coffee has received yet another delisting notice from the NASDAQ, sending its shares further down. The company confirmed on Tuesday that it had received the notice last week, with the exchange demand an explanation for its failure in filing its annual report on time.
After the company confirmed reports of the notice, its shares prices plummeted a further 18 percent. The delisting notice was the second one sent to the company this year. The first notice was sent to the company in May, a month after it disclosed that an internal investigation had found that its top executives had faked its financial reports in the previous year.
The executive, Luckin Coffee's chief financial officer, Jian Liu, along with other employees had fraudulently bloated the company's financial reports with fake transactions amounting to about 2.2 billion yuan or roughly $311.5 million. Following a massive selling frenzy of its stocks, the NASDAQ was forced to temporarily suspend trading of the company's stock. Since it disclosed its findings in April, Luckin Coffee's stocks had dropped by more than 83 percent.
In response to the second letter, Luckin Coffee stated that it failed to file its annual report this month due to delays caused by the coronavirus pandemic. The company, which competes directly with Starbucks in China, added that it was also still waiting for the results on a new internal probe into its finances.
Luckin Coffee revealed that it has already scheduled an extraordinary general meeting next month to discuss and vote for further action to restore its reputation and purge its ranks. The company is reportedly considering the ousting of several directors, including its chairman, Charles Zhengqao Lu. Since it first found out about the fraud within its ranks, Luckin Coffee had already fired several executives, including its CFO and its CEO, Jenny Zhiya Qian.
The NASDAQ had allowed Luckin Coffee's shares to restart trading last month after it found sufficient evidence of it taking appropriate action to remedy its issues. When trading of the stock was frozen back in April, it had closed at around $4.39 per share. Since then, the stock has fallen further down and closed at around $2.6 per share in premarket trading on Tuesday. The scandal had also resulted in the company defaulting on one of its loans, which was secured after it pledged part of its shares.
At its highest point in January, Luckin Coffee's shares were trading at around $50 per share. Prior to the scandal, the company's shares had remained strong amid its aggressive expansion campaign in China and its overseas markets.
