Withdrawn from American stock exchanges during the summer of 2020 and plagued by corruption scandals involving its succession of CEOs, Chinese coffee company Luckin Coffee (OTC: LKNC.Y) made headlines again today, this time with Chapter 15 bankruptcy filing. The Associated Press reports that the company will keep its physical facilities open during the bankruptcy process as it seeks to restructure itself into a viable business.
Luckin filed for Chapter 15 bankruptcy, because that is the type available to foreign companies operating in the United States. Just over a month ago, the company agreed to pay a $ 180 million fine after the U.S. Securities and Exchange Commission (SEC) accused it of allegedly adding $ 300 million in nonexistent sales to its balance sheet in 2019 and early 2020. The company, also fined by the Chinese government, agreed to pay the SEC fine without admitting the charges.
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Luckin’s revenue appears to be growing steadily year on year, with revenue growing 18.1%, 49.9% and 35.8% in the quarters ended in March, June and September 2020, respectively. That figure is well below the 300% to 500% growth that the company reported before the SEC charges, but it apparently proves that the company’s combination of franchises and self-managed locations can generate genuine profit.
Meanwhile, with Luckin’s shares plummeting more than 46% since the market opened, the rival coffee chain Starbucks (NASDAQ: SBUX) is trading at an increase of approximately 3.5% today. News of Luckin’s continuing problems may be fueling Starbucks’ earnings, but Starbucks also received a positive signal from Gordon Haskett today. The analytics company raised its rating for purchase and its price target from $ 100 to $ 120, and said that Starbucks is expected to profit considerably from “the increasingly aggressive pursuit of competitive advantages in digital, delivery, convenience, customer loyalty. and stability of the workforce. ”