Luckin Coffee Receives Delisting Notice From Nasdaq

On Tuesday, Luckin Coffee (LK) - The Beijing-based coffee chain - revealed that it receives its second delisting notice from Nasdaq. The reason for this is because the company is yet to file its annual report. Luckin revealed that it receives the notice last week. 

In May 2020, the listing qualifications staff of the Nasdaq had already indicated its intent to delist the company based on "public interest concerns as raised by the fabricated transactions," and the failure of the company to disclose the vital information of the past including the annual report. 

The news sent Luckin Stock down 17%. Although the company has a base in China, Luckin Stock is traded more in the United States

Added to this, the company has lost 95% If its valuation since January. This is partly as a result of the coronavirus pandemic and the scandal against the company. 

In February, however, a short-seller started questioning the validity of the growth in the company's transaction and stated that  China isn’t quite the coffee market that Luckin said it was. Muddy Waters Research called Luckin “a fundamentally broken business.”

Luckin denied the allegations. But in early April, another incident of a massive fraud led by the company’s chief operating officer was revealed. The fraud retrenched the previous allegation denied by the company.  

The company’s CEO was terminated in May.

Ever since this occurrence, the company has been dealing with the aftermath.

The delay of filing the annual report is partly because of the coronavirus pandemic and the internal fraud scandal which the company is yet to resolve.

It is noteworthy that delisting threatens the productivity of a company because, once a company is delisted, it can only be traded over the counter. This implies that further transactions with the company will be carried out over the counter