Luckin Coffee Fraud Scandal Follow-up: Luckin Coffee Announces Completion of Financing Milestone with Bright Future Prospects
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According to Zhitong Finance APP, on June 15, Luckin Coffee (OTC: LKNCY) announced that it had completed the "financing milestone" according to the "Restructuring Support Agreement" (RSA) signed with holders of the company's $460 million convertible preferred bonds due in 2025.
According to the provisions of the "Restructuring Support Agreement," Luckin Coffee needed to complete the initiation of formal Chinese regulatory approval procedures by June 14, 2021, and transfer funds overseas through the planned capital reduction, in an amount sufficient to satisfy the cash consideration.
Now, Luckin Coffee has completed the approval procedures of Chinese regulatory authorities, including obtaining relevant approval from China's State Administration of Foreign Exchange (SAFE) through a designated Chinese foreign exchange handling bank, in order to transfer the required funds outside of China through the planned capital reduction. This satisfied the financing milestone stipulated in the "Restructuring Support Agreement." According to the agreement, bondholders collectively hold or control approximately 94% of the total principal amount of existing bonds.
Luckin Coffee's Development Timeline
According to the development timeline shown on Baidu Baike:
In October 2017, the first Luckin Coffee store opened for business.
On March 28, 2018, Luckin Coffee (China) Co., Ltd. was established.
On July 11, 2018, Luckin Coffee announced the completion of a $200 million Series A financing, with a post-investment valuation reaching $1 billion.
On December 12, 2018, Luckin Coffee announced the completion of a $200 million Series B financing, with a valuation reaching $2.2 billion.
On April 22, 2019, Luckin Coffee submitted a prospectus to the U.S. Securities and Exchange Commission (SEC), planning to raise up to $100 million and seeking to list on the NASDAQ exchange under the code "LK".
On May 16, 2019, the IPO issue price was determined, and it was listed on May 17.
The Fraud Scandal and Recovery
Luckin Coffee was once a source of pride for Chinese people, until the shocking fraud incident in 2020. On April 2, 2020, Luckin Coffee announced that it had acknowledged false transactions amounting to 2.2 billion RMB, causing its stock price to plummet by 80%, with trading suspended multiple times during the day.
On April 5, Luckin Coffee issued an apology statement on its official Weibo account regarding the financial fraud incident.
In December 2020, Luckin Coffee was charged with fraud by the U.S. Securities and Exchange Commission (SEC) and agreed to pay $180 million to reach a settlement.
In February 2021, Luckin Coffee filed for bankruptcy protection in the United States.
After implementing a series of measures such as replacing the management team and accelerating product launches, Luckin Coffee has achieved a basically stable situation. The fact that Luckin Coffee can still maintain normal store operations to this day is related to the rise of the coffee consumption market in China. According to a report by Canbao Dian on June 11, capital is relatively optimistic about the coffee industry. Information from Canbao Dian's "2020-2021 China Industry Development Research Report" shows that in 2020, at least 10 brands received favor from capital, including Yongpu Coffee, Sandianban, and Yingji Coffee.
Renewed Investor Interest
This year, financing events for coffee brands have also occurred frequently. On January 15 of this year, M Stand completed a 100 million RMB Series A financing; on June 11, boutique coffee brand Yongpu Coffee completed a Series A+ financing of over 50 million RMB, with investors including Zhongyuan Capital and Maixing Capital; on June 16, coffee chain brand Manner Coffee completed a Series B+ financing of several hundred million dollars, with ByteDance as the investor.
Luckin Coffee has once again gained favor from capital, completing the "financing milestone." Chinese food industry analyst Zhu Danpeng analyzed that Luckin Coffee will not have too many litigation disputes in the short term, otherwise capital would be unwilling to enter. The continued investment in Luckin Coffee also indirectly proves that capital is optimistic about Luckin Coffee's development.
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