Luckin Coffee’s Lu Zhengyao is in deep water. Over the weekend, Caixin reported that the chairman of the Chinese coffee chain may face criminal charges in China following an email discovery that showed Lu had told his colleagues to commit fraud. Shares of the NASDAQ-listed company fell 13% on Monday following the report.
Multiple sources familiar to the investigation told Caixin that evidence was found that Luckin had also paid taxes on fabricated transactions. In early April, the NASDAQ-listed company admitted to inflating transaction volume by RMB2.2 billion last year, sparking a rapid sell-off of shares on April 6. In late April, Chinese authorities opened an investigation and raided the company’s Xiamen headquarters.
READ MORE: Luckin Coffee Headquarters Raided by Chinese Market Regulators
Luckin received a delisting notice from NASDAQ in mid-May, but has already requested a hearing which could take place in as early as a couple weeks. Luckin’s spring scandal has not only put the coffee chain on blast, but has also negatively impacted other Chinese companies currently listed on US stock exchanges.
On June 4, the Trump administration issued a memorandum titled ‘Protecting United States Investors from Significant Risks from Chinese Companies,’ which called for “firm, orderly action to end the Chinese practice of flouting American transparency requirements without negatively affecting American investors and financial markets.”
Chinese tech giants JD and Baidu are reportedly eyeing secondary listings in Hong Kong, Fortune reports. Charles Li, CEO of Hong Kong Exchanges and Clearing, attributes the interest to re-list in China to greater scrutiny from the US and a 2018 policy change that allows companies to list dual-class shares on the Hong Kong exchange.
READ MORE: Score Cheap Coffee on This Popular App Before It's Too Late
[Cover image via @luckincoffee瑞幸咖啡/Weibo]
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