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Luckin Coffee confirms notice of stock market delisting

Company is planning to request a hearing

The Chinese coffee shop chain Luckin Coffee has acknowledged that it had received a notice from the Nasdaq Stock Market LLC (Nasdaq) on May 15, indicating that the Listing Qualifications Staff has determined to delist the Company’s securities from Nasdaq.

There are two bases for the delisting: public interest concerns as raised by the fabricated transactions disclosed by the company in a Form 6-K on April 2, 2020, pursuant to Nasdaq Listing Rule 5101; and the company’s past failure to publicly disclose material information, citing a business model through which the previously disclosed fabricated transactions were executed, pursuant to Nasdaq Listing Rule 5250.

Luckin is planning for a hearing. It will continue to be listed on Nasdaq, pending the outcome. The hearing will typically be scheduled to occur approximately 30 to 45 days after the date of the hearing request.

Luckin’s trading has been suspended since April 7. Its chief executive has left the company.

The current US administration is planning tougher regulations against Chinese stocks. It is reported that over 100 Chinese companies were forced to delist or had trading suspended on the New York Stock Exchange upon accounting irregularities.

IEG Vu understands that many of the Chinese companies listed in the US are non-food related companies such as technology or new energy. A local contact familiar with Chinese overseas listing told IEG Vu that big food companies prefer to get listed in Hong Kong as Asian investors understand China’s food standards, practices and culture.

Orange juice

Neil Murray writes: the big question for many is: how will this affect Luckin’s contract with Louis Dreyfus?

Last year, Louis Dreyfus signed a contract with Luckin to produce NFC fruit juices for the chain to sell through its coffee shops. Given that Chinese apples are generally too sweet for NFC juice applications, and its own orange juice production also unsuitable, that would only leave imported juice or, possible, freshly squeezed juice from imported fruit.

Some IEG Vu contacts were speculating whether this would open the door to a Chinese presence in the Brazilian orange juice industry, which would not be regarded favourably by the established large players.

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