Send me real-time posts from this site at my email

Court Rules Against Luckin to Pay Banks After Losses

Charles Lu and Luckin Coffee (NASDAQ: LK) continue to face trouble after an accounting scandal broke in April. The company was sued by several banks, including Credit Suisse (NYSE: CS), and a Cayman Islands court ruled in the banks' favor.

The scandal that keeps on going

Luckin was temporarily delisted from the Nasdaq after it was revealed that it had reported fraudulent revenue numbers, and Charles Lu, the company's chairman, has seen his empire start to crack. His investment firm has had to sell its stake in other companies as they try to separate from Luckin, and several banks sued him for $324 million in defaulted loans.

Image source: Getty Images.

Lu will have to sell shares of Luckin, in which his firm is the majority shareholder, to pay back the loans. Lu currently owns 36.8% of Luckin voting rights through his ownership of Class B shares by his family-owned investment firm, which gives him 10 times the voting rights of Class A shares.

The court gave the verdict that Lu must transfer 131.25 million Class B shares to KPMG to liquidate to pay off the loans, which amounts to about $63 million based on Luckin's Friday closing price of $3.82.

This could seriously weaken Lu's hold on Luckin's voting rights as the scandal continues to plague him. The revelations implicated the company in fabricating $310 million in revenue.

Stock keeps dropping

Luckin's stock, which had reached a high of $50 in January 2020, has dropped more than 90% year to date.

10 stocks we like better than Luckin Coffee Inc.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Luckin Coffee Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of June 2, 2020

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Luckin Coffee Inc. The Motley Fool has a disclosure policy.


Popular posts

Welcome! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue