Luckin Coffee sticks by chairman despite scandal over fake sales

Embattled Luckin Coffee chairman Charles Zhengyao Lu. (Reuters)
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Updated 04 July 2020

Luckin Coffee sticks by chairman despite scandal over fake sales

  • Luckin suspended trading on June 29 and will be delisted from the Nasdaq by the end of next week.

BEIJING: Embattled coffee chain Luckin Coffee has decided against ousting its founder and chairman, despite an internal investigation concluding that last year’s revenue included millions of dollars in fake sales.

The massive financial scandal has already cost the company two top executives, caused shares to plummet more than 70 percent and put its billionaire founder Charles Zhengyao Lu in the line of fire — and will see it delisted from the Nasdaq in New York.

But the directors decided Lu would remain chairman, the company said, a day after an internal probe found its 2019 net revenue was inflated by 2.12 billion yuan ($311 million).

A proposal to oust Lu failed to get the necessary two-thirds majority vote on Thursday, Luckin said in a filing to the US Securities and Exchange Commission.

The company’s shares went into freefall after it revealed in April that a top officer may have faked billions of yuan worth of sales.

The chain has since fired CEO Jenny Zhiya Qian and chief operating officer Liu Jian.

On Wednesday, Luckin said in a separate filing that a special committee investigation had found the fabrication of sales traced back as early as April last year.

Apart from the inflated revenue, Luckin’s 2019 costs and expenses were also found to be inflated by 1.34 billion yuan.

The committee’s recommendations — which led to Qian and Liu’s removals — brought about a proposal to oust Lu as well.

While it eventually failed to garner enough support to remove Lu, the board earlier announced its decision to fire another 12 employees involved in the fake transactions.

Luckin suspended trading on June 29 and will be delisted from the Nasdaq by the end of next week, having been asked to do so by the exchange.

The chain launched in 2017 and raised $561 million in its initial public offering less than two years later, with plans to dethrone Starbucks in China via an aggressive growth strategy, enticing customers with an app-based purchasing model that prioritized takeaway and delivery options, and generous mobile coupons.

By the end of 2019, the Xiamen-headquartered firm’s 4,500 outlets in mainland China had already surpassed Starbucks’ local footprint, and investors touted the company’s potential to go global. 

The scandal has dealt a blow to US-listed Chinese firms, who find themselves under increased scrutiny as tensions flare between the two superpowers.

Lu must still face a vote of confidence by shareholders on Sunday at an extraordinary general meeting.


Canada’s Trudeau to unveil plan to address coronavirus outbreak, revive economy

Updated 23 September 2020

Canada’s Trudeau to unveil plan to address coronavirus outbreak, revive economy

  • Trudeau will stress the need for environmental policies such as retrofitting buildings, boosting the use of electric vehicles and biofuels
  • Trudeau is paring down talk of a green revolution to slash reliance on export of fossil fuels

OTTAWA: Canadian Prime Minister Justin Trudeau will unveil on Wednesday what he says is a far-reaching plan to help the economy recover from the coronavirus pandemic while ensuring efforts to fight the outbreak do not falter.
Trudeau, who has consistently vowed to do more to combat climate change, is paring down talk of a green revolution to slash reliance on export of fossil fuels as Canada faces a resurgence in coronavirus cases.
“The three prongs of what we are doing are fighting COVID-19, supporting Canadians, and a resilient recovery,” said a government source who requested anonymity given the sensitivity of the situation.
The so-called Speech from the Throne outlining government plans is a confidence measure and given that Trudeau’s Liberals only have a minority in the House of Commons, they will need the support of opposition legislators to avoid being toppled and plunging the country into an election.
The left-leaning New Democrats have made clear they are likely to vote in favor. Trudeau’s popularity initially soared over his handling of the pandemic, but polls suggest he and the Liberals were damaged by a scandal over his close ties to a charity chosen to run a student grant program.
Parliament is usually packed for the occasion but COVID-19 means few legislators will be present when Governor General Julie Payette — the representative of Queen Elizabeth, Canada’s head of state — delivers the speech at around 3 p.m. (1900 GMT).
Later on Wednesday, Trudeau plans to make a national address to address the urgency of fighting COVID-19, a spokesman said.
Officials say the throne speech will contain policy proposals such as childcare and an expanded employment insurance program rather than specific spending commitments, some of which will be disclosed in a fiscal update later in the year.
But Trudeau will stress the need for environmental policies such as retrofitting buildings, boosting the use of electric vehicles and biofuels, aides say.