Luckin Coffee’s US$400 million convertible bond faces forced selling by index trackers
- Index providers are poised to follow US Nasdaq’s move to delist Luckin Coffee securities
- State Street’s US$1.02 billion ETF tracking the Refinitiv index offloads Luckin Coffee bond
Exchange-traded fund managers who have been tracking Luckin Coffee’s US$400 million convertible bond issued in January will likely have to sell out if the US Nasdaq exchange follows through on its intention to delist its shares.
Already, index provider Refinitiv Benchmark Services ejected Luckin Coffee’s convertible bond from its “Refinitiv qualified global convertible index” on April 15, the first index provider to do since the company’s accounting scandal. Other index providers could also disqualify it as a benchmark constituent.
The bonds are convertible into Luckin Coffee’s American depositary shares (ADS) before they mature in 2025. Refinitiv’s benchmark is tracked by a US$1.02 billion exchange-traded fund managed by State Street Global Advisors.
Refinitiv’s move came ahead of the Nasdaq exchange’s decision to delist Luckin Coffee’s ADS earlier this month, which the Xiamen-based start-up has said it plans to appeal.
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The Refinitiv index, which comprises over 200 constituents, is tracked by State Street Global Advisors’ SPDR Thomson Reuters Global Convertible Bond ETF that held US$2.75 million worth of the Luckin Coffee bonds, an April filing from Bloomberg showed. A State Street spokeswoman declined to comment on the ETF.