Ruixing Coffee Suspension Ruixing Coffee Announcement Suspension Lawsuit

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Qianjie-Luckin Coffee suspended trading

Recently, the coffee industry is not peaceful, broke out a global heat continues to heat up the incident-Luckin Coffee forged 2.2 billion yuan of transactions. And this matter is still Luckin Coffee self-exposure, as a listed company, such a serious fraud incident exposed, the consequences can be imagined. Luckin Coffee's share price continues to fall, and so far, Luckin Coffee's market value has lost more than 5 billion US dollars, causing Luckin Coffee Chairman Lu Zhengyao to directly burst his position. According to Goldman Sachs, shareholders holding Luckin Coffee shares defaulted on their pledged loans, and the lender enforced 76.4 million Ruixing shares pledged by Luckin Coffee shareholder Haode Investment Inc. (Lu Zhengyao is the actual controller).

At present, Luckin Coffee, a listed company with a market capitalization of US $1.1 billion, has announced a direct suspension of trading, waiting for more information to be disclosed. Lu Zhengyao pledged US $518 million. It is also understood that Lu Zhengyao pledged US $518 million. Even if Lu Zhengyao's stake is exposed, his voting rights in Luckin Coffee will not be reduced, but Luckin Coffee CEO Qian Zhiya's voting rights will be significantly reduced.

Earlier, short selling reports from anonymous institutions revealed that Lucky's management had pledged 49 per cent of its stock holdings (or 24 per cent of the total number of shares issued), exposing investors to the risk of margin calls leading to a collapse in share prices.

Lucky's management stressed that they had never sold any shares in the company; however, they had cashed in through stock pledge financing, the report said. The number of shares mortgaged is almost half of their total shares, valued at $2.5 billion at the time.

Stock pledge financing is a common way for management to obtain financing without directly selling shares, which is often regarded as a negative signal by investors. It is also seen as a key red flag in corporate due diligence, as a large number of stock pledges can form a negative cycle, causing share prices to plummet.

Management can use their securities as collateral to obtain loans from banks and brokerage firms. When the value of the pledged stock falls, lenders ask borrowers to provide more cash or collateral. If they cannot come up with the money, lenders can sell shares to recover the arrears, further depressing share prices and sparking more demand for collateral.

Prior to this, Lu Zhengyao recently apologized for falsifying the trade of 2.2 billion, saying, "since the accident, I have been very ashamed and sad." After the fraud incident came out, too many people were disappointed and injured. " "the company has been running too fast in the past two years, which has caused a lot of problems. Now I have a bad fall. As chairman of the board, I cannot absolve myself of the blame. Through the moments, I sincerely apologize to everyone.-I'm sorry! "

Lu Zhengyao also said that he accepts all doubts and criticisms and will try his best to recover the losses. At present, a number of law firms in the United States will file lawsuits against Luckin Coffee and specific managers, and Luckin Coffee has also submitted an application for insurance claims to relevant insurance companies.

It is reported that Luckin Coffee took out Dong liability insurance before listing in the United States, with a total insurance amount of 25 million US dollars. The "co-insurance" composed of Luckin Coffee Dong liability insurance policy has four layers, and the "bottom co-insurance" is composed of eight Chinese-funded companies with an insurance amount of 10 million US dollars. Ping an property Insurance of China is the "bottom" lead insurer, with an underwriting share of 30 per cent.

Although Lu Zhengyao is a shareholder and chairman of Luckin Coffee, he resigned as CEO and became a non-executive director in April 2016. He has not participated in the day-to-day management of the Group since then. In addition, Liu Jian, chief operating officer of Luckin Coffee, has ceased to hold the position of department director in the company since 2015. "

Luckin Coffee's financial fraud of 2.2 billion yuan affected the insurance sector. At present, a number of law firms in the United States will file lawsuits against Luckin Coffee and specific managers, and Luckin Coffee has submitted an application for insurance claims to relevant insurance companies. Data show that Luckin Coffee took out Dong liability insurance before listing in the United States, with a total insurance amount of 25 million US dollars, and a number of domestic insurance companies participated in this underwriting in the form of co-insurance.

Thornton Law Firm LLP, a US law firm, reminded investors that it had filed a lawsuit against Nasdaq:LK on behalf of its shareholders.

Thornton Law Firm LLP said that for investors who bought Luckin Coffee's shares or other securities between April 1, 2016 and April 2, 2020, Thornton Law Firm LLP sued Luckin Coffee mainly because Luckin Coffee COO Liu Jian fabricated fake transactions.

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