Luckin Coffee appoints liquidators, financial advisers to restructure and salvage business after accounting scandal
- Court names two officials from Alvarez & Marsal as provisional liquidators to oversee its business under the daily control of board of directors
- Luckin hires Houlihan Lokey as financial advisers to negotiate with creditors on its financial debt; estimates unrestricted cash at US$780 million
The start-up company named Alexander Lawson of Alvarez & Marsal Cayman Islands and Tiffany Wong Wing Sze of Alvarez & Marsal Asia to act as “light-touch” joint provisional liquidators (JPLs) under a Cayman Islands court order, it said in a regulatory filing in New York. The move was in response to a winding-up petition by an undisclosed creditor, it added.
Luckin’s stock has lost about 90 per cent or US$11 billion in market value since the scandal broke out in early April, prompting regulators to take steps to delist the company from the Nasdaq stock exchange barely 14 months after its debut.
Touted as China’s Starbuck, Luckin Coffee’s business model was built on outselling its rivals by expanding its outlets at breakneck speed and offering deep discounts to build followers. With a large latte priced at 24 yuan, about 20 per cent cheaper than what it costs at its Seattle-based rival, the chain quickly built up a network that reached 3,680 stores by September 2019 versus 1,189 a year earlier.
If the numbers were to be believed, it sold 34.6 million cups of freshly brewed coffee in the quarter to September 30, and counted 30.7 million of transacting customers.