Luckin Coffee Inc. announced Friday that its shares would be canceled from next week's trading on the Nasdaq, as it backed out of a request for a hearing on the delisting notification with the US stock exchange.
The Chinese company has been issued with two de-listing notices in the last two months and has already lost almost 90 percent of its market value since the group revealed an internal probe against its chief operating officer for overestimating as much as 2.2 billion yuan in revenues last year.
Luckin Coffee had aspirations of emerging as successful with its US investors as its competitor Starbucks. But after an accounting controversy, the company is now on its way to bid adios to Wall Street.
Nasdaq issued Luckin Coffee its first delisting notice on May 15. The company received a second notice on June 17. This time, Nasdaq warned that failure to file an annual report would be additional grounds for the delisting of its shares.
Luckin Coffee terminated its chief executive officer and chief operating officer in May after it was found the CFO fraudulently jacked up its sales. The company's stocks collapsed over 50 percent to around $1.40.
The Chinese group disclosed in a media release on Friday that shares will now be suspended from trading starting on June 29. Luckin Coffee, established in 2017, went public in 2019 and rallied as a result of what -- at the time of its listing -- appeared to be a solid sales performance.
The company has been mired in a financial anomaly probe that has pushed its stock plunging more than 88 percent in the last quarter, caused the firing of key executives, and added to a delay in the group's annual report.
Luckin Coffee's stock will likely continue to be traded via over-the-counter markets after the company's delisting. But the reason why stocks tend to climb in value when they're first added to top exchanges is that there's more liquidity on exchanges, which makes it very convenient for investors to acquire and unload shares.
Nasdaq's reasons for delisting Luckin Coffee include public worries created by the altered transactions, the company's failure to divulge material information, and file its yearly report. According to Luckin, Nasdaq will file a Form 25 notice of delisting, when all appeal periods have expired.
It's not clear what's Luckin Coffee's next move will be, now that the company can no longer have access to Nasdaq to secure fresh capital. As of late 2019, Luckin had 3,680 stores. However, speculations of bankruptcy have been floating in the wake of the scandal.
