Luckin Coffee is preparing to relist its stock in the United States, the company’s co-founder and CEO Jingyi Guo said at an entrepreneurs’ gathering earlier this month, five years after a $300 million accounting scandal derailed the coffee chain’s business. “Under the guidance of the city government, we are actively pushing forward with the process of relisting on the main board of the United States,” Guo said, speaking at a government-sponsored event in the southeastern city of Xiamen, where Luckin Coffee is headquartered, according to a CNBC translation of a speech in Mandarin released by a government-backed business association. Guo acknowledged the government’s support for Luckin’s restructuring, adding that once the relisting process is completed, it will help enhance Xiamen’s reputation as an attractive location for global business and investment. However, Guo did not provide details on the company’s progress toward relisting. In an emailed statement to CNBC, a company spokesperson said Luckin Coffee “does not have a firm timeline for returning to mainboard listing, but remains committed to the U.S. capital markets.” “Our current priorities are to focus on strategy execution, concentrate on business operations and development, and strengthen our brand influence and market competitiveness,” the company said. Luckin was delisted from the Nasdaq stock exchange in June 2020 after it was revealed that the coffee chain had fabricated more than $310 million in 2019 profits. Six months later, Luckin agreed to pay a $180 million penalty to settle accounting fraud charges with the U.S. Securities and Exchange Commission. Guo took over as CEO in 2020 after co-founder and former chairman Charles Zhenyao Lu was fired amid an internal fraud investigation. In 2022, Luckin announced that it had completed the restructuring of its financial debt and emerged from Chapter 15 bankruptcy proceedings. The company’s shares continue to trade over-the-counter in the U.S. after being delisted, and as of Tuesday night, the company’s market valuation was approximately $10.9 billion. For comparison, Starbucks’ China operations were recently valued at $4 billion on a cash-free and debt-free basis, excluding the licensing of the Starbucks brand and intellectual property. Once on the brink of collapse, the coffee chain has made a remarkable comeback as its affordable drinks attract more and more customers, and will overtake Starbucks as China’s largest coffee retailer in 2023. Luckin is also competing with Starbucks in its home state, opening two new stores in New York City in July. The turnaround was supported by support from its largest shareholder, private equity fund Centurium Capital, which doubled down on investments to cover Luckin’s mounting legal costs and fines following the 2020 scandal and set up its own team to turn the business around. In April of this year, Centurium Capital founder David Lee became the company’s chairman. Some industry observers see the move as an indication of Luckin’s plans to accelerate its U.S. relisting. Media reports have surfaced that the coffee chain is planning to relist on the Nasdaq as early as 2022. However, the company has disputed the report, with Mr. Guo as recently as last October saying on a conference call with investors that Luckin does not have a clear timetable for a listing. New overseas listings by Chinese companies must be filed with the China Securities Regulatory Commission under rules that take effect in 2023. It is unclear whether Luckin has approached regulators about plans to relist in the U.S., and Luckin could face regulatory hurdles in meeting the U.S. SEC’s financial disclosure requirements. Publicly traded companies in the United States are required to have their financial statements audited by an accounting firm registered and supervised by the Public Company Accounting Oversight Board (PCAOB). In July, the PCAOB permanently revoked the license of Luckin Coffee’s former auditor, Centurion ZD Certified Public Accountants, for violating audit rules for companies doing business in China. Regulators said the company failed to identify and assess fraud risks in Luckin’s 2021 financial report. Luckin has retained BDO China Shu Lun Pan Certified Public Accountants LLP as its auditor starting in 2022, according to company filings. Centurium Capital and the China Securities Regulatory Commission did not immediately respond to CNBC’s requests for comment. Luckin’s sales in the second quarter of this year rose 47.1% from a year earlier to $1.7 billion, and the company had 26,206 stores worldwide as of the end of June, according to filings. —CNBC’s Evelyn Cheng contributed to this report.
