Ruixing Coffee went bankrupt? Ruixing Coffee urgently launched "poison pill plan" to deal with malicious takeover

On October 15, Ruixing Coffee announced on the website of the Securities and Exchange Commission that the board of directors of Ruixing Coffee unanimously approved a shareholder rights plan to protect the interests of shareholders of the company. The Board may, in its sole and absolute discretion, decide that a shareholder or prospective shareholder shall not be bound by the equity plan if the plan, if triggered, would dilute the ownership of any acquirer before such shareholder or prospective shareholder becomes an acquirer.

The board of directors of Ruixing believes that the rights plan is an effective course of action for the board of directors to fulfill its fiduciary responsibilities to the company and its shareholders and enable shareholders to realize the long-term value of their investments. The entitlement plan was adopted after careful evaluation and consultation with the company's external legal counsel and was supported by the company's joint provisional liquidator.

According to media reports, the announcement pointed out that Ruixing Coffee will implement equity dilution anti-takeover measures in response to previous hostile takeovers against the company and ensure Ruixing Coffee's future development.

The so-called equity dilution anti-takeover measures are commonly known as "poison pill plans" in the industry and are one of the more commonly used anti-takeover strategies of many companies.

What do you mean "poison pill"?

A simple understanding is that when a company encounters a hostile takeover, especially when the acquirer's shares have reached 10% to 20%, the company will issue a large number of new shares at a low price in order to keep its controlling stake, so that the proportion of shares in the hands of the acquirer will decrease and it will not be able to achieve the goal of controlling shares.

According to the Beijing News report: Ruixing Coffee's "poison pill plan" can prevent malicious acquirers while also focusing on preventing possible "curve regression" of the original fake management. If the original fake management "curve regression", it is likely to trigger a new round of management turmoil.

At the same time, Ruixing Coffee achieved revenue growth and improved operating results, and the Board and management team remained committed to driving performance growth and creating value to protect investor rights.

Luckin Coffee said significant progress had been made in restructuring, including strengthening internal controls and corporate governance.

In addition, on the evening of September 21, Ruixing Coffee issued three announcements that attracted the attention of the media and public opinion. The announcement disclosed a series of "milestone" progress in corporate restructuring, including

1. The Company has signed a US$187.5 million letter of intent settlement with representatives of plaintiffs in the U.S. class action lawsuit;2. The Company has formally filed a debt restructuring proposal with the Cayman Court for convertible bond creditors; and 3. The Company has formally filed its 2020 annual report with the U.S. Securities and Exchange Commission (SEC), including audited financial statements.

The first two of the statements concern investor class actions and corporate debt settlements, respectively, while the first three are the 2020 annual report.

The news released, Ruixing in the United States pink single market trading prices rose sharply, two trading days rose more than 10%, the total market value of 4.088 billion US dollars.

Pink sheet market refers to the market that provides quotation service for trading circulation of securities that do not meet the listing conditions. After Ruixing Coffee delisted from American stocks, it did not go bankrupt directly as expected. On the contrary, its securities are still trading in pink sheet market, and it is becoming more and more stable. This is regarded as the last guarantee for shareholders in American stock market after delisting of enterprises, but there are also enterprises that rise again from pink sheet market. Now Ruixing has come to this correct path.

Although Ruixing fraud storm is coming to an end, but in this matter, Ruixing still has trouble, At present, Ruixing and the United States class action plaintiff representatives signed a $187.5 million settlement letter of intent has not been approved by the Cayman court and the United States court, Once the settlement plan is approved, It means Ruixing coffee related to "financial fraud" scandal another big trouble is about to be solved.

According to previous industry estimates, Ruixing faces about $11.2 billion in compensation, but now according to preliminary settlement calculations, Ruixing only needs to pay a total of about 2.4 billion yuan, including $180 million paid to the SEC (about 1.17 billion yuan) and $187.5 million (about 1.2 billion yuan) paid to investors, the outside world pointed out: this time with the signing of a settlement agreement with American investors, lucky is expected to usher in a new life, but also by the media that "lucky turn around soon."

Of course, in addition to the unresolved troubles mentioned above, the competition in the coffee industry is becoming more and more fierce, and Ruixing Coffee will still face many challenges if it wants to rise again. It is not yet known whether Ruixing can realize "turning over" and re-enter six capital markets.

* Image source: Internet

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