Chinese coffee chain Luckin Coffee, still reeling from its fraud scandal, has been notified by Nasdaq that it will be delisted from the stock exchange.
The notice cited two reasons for delisting Luckin—public interest concerns because of the fabrication scandal and the company’s past failure to publicly disclose material information.
The brand hopes to challenge the move in a hearing before a Nasdaq Hearings Panel. Luckin will remain on the stock exchange until a decision is made in said hearing.
“There can be no assurance that the Panel will grant the Company’s request for continued listing,” the company said in a statement. “According to the Notice, the Hearing will typically be scheduled to occur approximately 30 to 45 days after the date of the hearing request.”
Luckin was founded in 2017 and set a goal to overtake Starbucks as the No. 1 coffee chain in China. In three years, the brand exploded and grew past 4,500 locations. Last year, it raised roughly $645 million in an IPO. The company aims to cut out the cashier-customer interaction by handling the purchase process digitally.
However, 2020 has been a tumultuous year for the company. In January, the company was dealing with the COVID-19 pandemic raging through China. At the same time, short seller Muddy Waters publicized an 89-page anonymous report that alleged several instances of wrongdoing by the company.
At the time, Luckin strongly denied the report, and described the document as flawed and unsubstantiated.
Then in early April, the company revealed an internal investigation in which it accused its COO of fabricating $310 million worth of sales. Investigators also found that costs and expenses were inflated. CEO Jenny Zhiya Qian and COO Jian Liu were both fired as a result of the scandal. Six other employees who were involved in or had knowledge of the fraud were placed on suspension or leave.
Luckin said it’s been cooperating with and responding to inquiries from regulatory agencies in China and the U.S. Trading in Luckin stock has been suspended since April 7. When Luckin revealed the investigation, its stock tanked more than 80 percent.
The company said in April that investors should no longer rely on previous financial statements and earnings releases for the nine months ending September 30, 2019, and the two quarters starting April 1, 2019 and September 30, 2019, including the prior guidance on net revenues from products for Q4 2019.