Luckin Coffee goes bankrupt with Chapter 15 filing
Deleted from the US stock exchanges in the summer of 2020 and plagued by corruption scandals involving his succession as CEO, Chinese coffee company Cafe Luckin (OTC: LKNC.Y) made headlines once again today, this time filing for Chapter 15 bankruptcy. The Associated Press reports that the company will keep its physical locations open during the bankruptcy process as it seeks to restructure into a business viable.
Luckin filed for Chapter 15 bankruptcy because it is the type available to foreign companies operating in the United States. Just over a month ago, the company agreed to pay a $ 180 million fine after the U.S. Securities and Exchange Commission (SEC) accused it of allegedly adding $ 300 million. dollars in sales that did not exist on its balance sheet in 2019 and early 2020. The company, also fined by the Chinese government, agreed to pay the SEC fine without admitting the charges.
Luckin’s earnings seem to be growing steadily year on year, with revenues up 18.1%, 49.9% and 35.8% in the quarters ending March, June and September 2020, respectively. This amount is well below the 300-500% growth reported by the company before the SEC accusations, but apparently proves that the mix of self-managed locations and company franchises can generate a real profit.
Meanwhile, as shares of Luckin tumble more than 46% since the market opened, rival coffee chain Starbucks (NASDAQ: SBUX) is trading up around 3.5% today. News of Luckin’s lingering issues may be fueling Starbucks earnings, but Starbucks also received approval from Gordon Haskett today. The analytics firm raised its buy rating and price target from $ 100 to $ 120, and said Starbucks is expected to gain significantly from “the increasingly aggressive pursuit of competitive advantages in digital fields. , delivery, convenience, customer loyalty and workforce stability. ”
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