Luckin Coffee posted a vast $5.6 billion loss last year; compensation to U.S. investors could be up to $1.2 billion.
Luckin Coffee has once again made significant progress in its restructuring plan and capital market disclosure.
On the evening of September 21, Luckin Coffee made three announcements in a row, including signing a $187.5 million (RMB 1.212 billion) settlement letter of intent with representatives of the plaintiffs in the U.S. class action lawsuit; formally submitting a debt restructuring plan for convertible debt creditors to the Cayman Court; and formally filing its 2020 annual report, including audited financial statements, with the U.S. Securities and Exchange Commission (SEC). The announcement shows that RuiXing Coffee has entered into an agreement with the U.S. Securities and Exchange Commission (SEC) to issue an annual report for 2020.
The announcement indicates that Luckin Coffee has entered into a binding settlement agreement with representatives of U.S. investors in the class action lawsuit to fully resolve the claims of investors who bought the company’s stock between May 17, 2019, and July 15, 2020. The settlement, which could amount to up to $187.5 million, or approximately $1.213 billion, is still subject to approval by the Cayman and U.S. courts.
Meanwhile, in a separate statement, Luckin Coffee said it has formally filed a debt restructuring plan with the Cayman court for its convertible debt creditors regarding the $460 million 0.75% senior convertible notes. The program, if approved, would execute a restructuring support agreement as amended on March 16, 2021.
Based on its latest disclosed holdings, the aggregate principal amount of the existing notes held by RSA noteholders is well above the 75% voting threshold required to approve the plan of arrangement under Cayman Islands law.
Luckin Coffee also simultaneously announced its annual report for the fiscal year 2020. The report showed that net revenue for fiscal 2020 was $4.034 billion, with overall revenue growing 33.3% year-over-year compared to 2019 due to higher average selling prices of products despite the epidemic’s impact.
However, Luckin Coffee’s loss also increased further to $5.603 billion in fiscal 2020 compared to $3.161 billion in 2019. Operating expenses of $6,620.7 million, driven by economies of scale, decreased from 206.2% of net income in 2019 to 164.1% of net income in 2020.
As of December 31, 2020, Luckin Coffee operated 3,929 owned stores and 874 partnership stores in 56 cities in China; the cumulative number of customers transacted exceeded 64.9 million, well above the 40.6 million in the same period 2019.
On April 2, 2020, Luckin Coffee admitted to financial fraud and false transactions of RMB 2.2 billion; on May 12, 2020, CEO Zhiya Qian and COO Jian Liu were suspended from their positions. On June 27, 2020, Luckin Coffee was delisted entirely from NASDAQ.
The Enterprise Check App shows that on September 22, 2020, the State Administration of Market Supervision announced administrative penalty decisions against Luckin Coffee (China) Co., Ltd. and Luckin Coffee (Beijing) Co., Ltd. that constituted false advertising practices, as well as 43 third-party companies that played a role in helping with false advertising in the RuiXing incident, with a total penalty amount of 61 million RMB.
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