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.


Virus sees Booking.com slash quarter of global staff

Updated 04 August 2020

Virus sees Booking.com slash quarter of global staff

  • The company warned that “up to 25 percent” of employees could go in what it called an “extremely difficult step”
  • Booking.com’s Amsterdam headquarters was expected to be among the sites affected

THE HAGUE: Online travel agency Booking.com said Tuesday it will cut up to a quarter of staff worldwide due to the ongoing coronavirus pandemic, leading to thousands of job losses.
The Amsterdam-based booking site, which employs around 17,500 people around the world, declined to give an exact number of posts that will be slashed, saying details would become clearer “in the coming weeks and months.”
But it warned that “up to 25 percent” of employees could go in what it called an “extremely difficult step.”
“The Covid-19 crisis has devastated the travel industry, and we continue to feel the impact as travel volumes remain significantly reduced,” the company said in a statement sent to AFP.
“While we have done much to save as many jobs as possible, we believe we must restructure our organization to match our expectation of the future of travel,” it added.
Booking.com’s Amsterdam headquarters was expected to be among the sites affected, Dutch media reports added.
Hard-hit by the slowdown in international travel resulting from the lockdown, Booking.com follows in the footsteps of other digital travel sites such as Airbnb and TripAdviser, which have also laid off around 25 percent of their workforce.
Booking.com applied in April for state support.
Last month it received some 61 million euros ($71.8 million) from the Dutch state, making it the third-largest recipient of support behind flagship airline KLM and Dutch Rail (NS), the ANP national news agency reported.
Founded in 1996, Booking.com has some 28 million listings on its website which is available in 43 languages.