A report on Monday about Luckin Coffee sent the company's shares soaring in the US Over-The-Counter Pink Sheet Market. For a company that's been embroiled in a financial fraud scandal, is it coming back to life?
On August 10, China Science and Technology News Network quoted people with knowledge of the matter as saying that excluding the More than 300 stores in universities that are temporarily closed due to the epidemic, the Starbucks challenger has achieved overall break-even in July 2020.
The report added that based on current operational progress, it is expected to achieve overall profitability in 2021.
In the US Pink Sheet Market, Luckin Coffee shares rose sharply, up more than 20% at one point. At the close of trading, it was trading at $2.41 per share, up 13.68%.
While the effects of the financial fraud are still being felt, Luckin Coffee's operations haven't stopped there. In the first half of this year Luckin Coffee adopted a more refined operational strategy.
In the wake of the financial fraud, Luckin Coffee shifted from its previous strategy of massive and rapid expansion, opening new stores only in areas where it could maintain profitable operations.
It also shuttered previously relatively poorly-run stores, suspended its international operations, and significantly slowed down the unmanned retail and e-commerce businesses it launched earlier this year.
At the same time, it accelerated the pace of new product launches, launching nearly 60 products after April 2. It also released several new ranges and tweaked and upgraded some of its products based on market sales feedback.
Luckin Coffee has also stepped up its strategy of operating private circles and has established more than 9,000 WeChat groups.
As a result of these measures, the above report said that Luckin Coffee has achieved relatively stable operations in the wake of the counterfeiting incident, and will maintain this operational strategy until it becomes profitable.
However, it is worth noting that Luckin Coffee's top management, especially its board of directors, has undergone several changes since the outbreak of the counterfeiting incident on April 2 this year.
China's Starbucks equivalent shares plunge 83% after admitting fraud
Luckin Coffee made an announcement on the evening of May 12 that it was restructuring its management and the company's organization. The former CEO and COO involved in the fraudg were terminated, co-founder Guo Jingyi became chairman and CEO and joined the board of directors, and Cao Wenbao and Wu Gang were elected as directors of the company.
Subsequently, the investigation continued to make progress and Luckin Coffee twice received delisting notices from the NASDAQ before deciding to forego a hearing and officially delist.
On July 17, with the formal appointment of a provisional liquidator by the Cayman Islands Court, Luckin Coffee finally had the opportunity to negotiate and implement a restructuring of the company's debt and secure day-to-day operations from a relatively stable platform.
On 3 August, Luckin Coffee also announced that it had received a request for an extraordinary general meeting of the Company from Lucky Cup Holdings Limited and Fortune Cup Holdings Limited, both of which had proposed the reinstatement of Sean Shao as a director of the Company.
Although the operations of Lucky Coffee have returned to stability, the changes to its board of directors continue and there are still many unknowns.
