Nasdaq says it will delist Luckin Coffee, a month after the company revealed nearly half of its 2019 sales transactions were fabricated.
Luckin Coffee plans to challenge the move to delist the company before a Nasdaq hearing panel, and will remain listed pending an outcome. This week, Nasdaq tightened its listings rules to curb IPOs of Chinese companies that are not transparent about their accounting.
The move comes amid a push by U.S. lawmakers to delist Chinese companies from American stock exchanges. Senators, including Marco Rubio, argue Chinese companies should not have access to U.S. capital markets unless they are financially transparent and accountable. Rubio says, “The U.S. government cannot allow the Chinese government and Communist Party to continue to exploit our capital markets and flaunt our laws. The recent Luckin Coffee scandal — just one of many examples of Chinese fraud — should be a major wake-up call for policymakers and regulators that the time for action is now.”
Luckin Coffee said in early April that an internal investigation found $310 million in sales were fabricated. The company’s market value plunged $5 billion in a day, and investors lost millions.
If Chinese companies cannot list in the U.S., they may list in other places such as London and Hong Kong, eroding the primacy of U.S. markets. This week, Hong Kong revamped the inclusion rules for its flagship Hang Seng Index, permitting shares with unequal voting rights or primary listings elsewhere to join.
For more, see:
- Nasdaq informs China’s Luckin Coffee it plans to delist it / Reuters
- Exclusive: Nasdaq to tighten listing rules, restricting Chinese IPOs – sources / Reuters
- China urges its firms to list in London in renewed global push: sources / Reuters
- Hong Kong opens door for Alibaba in index overhaul / WSJ (paywall)
- Chinese customers divided over Luckin Coffee fraud scandal / SupChina
- Cooking the books at Luckin and TAL / SupChina