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Nasdaq Gives Luckin Coffee a Delisting Notice

By Jon Quast - May 19, 2020 at 12:22PM

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It seems inevitable the stock will be removed after its inflated sales scandal.

Shareholders of Chinese coffee company Luckin Coffee (LKNC.Y -1.96%) got the news they feared: Nasdaq gave the company a delisting notice. In a Tuesday press release, Luckin acknowledged it received notice last week. Nasdaq cited two reasons for the delisting. First, investors are concerned about the stock since it disclosed inflated sales. And second, Luckin's sales were inflated in the first place.

For now, Luckin Coffee stock is still frozen in place. Nasdaq paused trading to the stock on April 7.

A steaming cup of coffee sits on a wooden table in a dimly lit room.

Image source: Getty Images.

Fate all but sealed

In April, Luckin's management disclosed it was investigating its COO for inflating sales by about $300 million, and inflating expenses to make it all look real. The stock plummeted around 80% on the news, as shareholders fled in droves. Since that bombshell announcement, both the CEO and COO have been fired.

Those who immediately sold their Luckin shares surely feel it was the right move. A few days after revealing the fiasco, shares were halted from trading -- locking current shareholders in and new investors out. Currently, shares are still halted as Luckin appeals the delisting decision from Nasdaq. The stock won't be delisted until it's had a chance to plead its case. Its hearing should come in the next couple months.

Assuming Luckin loses its appeal, shares will trade over the counter after delisting from the Nasdaq exchange. Once a market darling, the former high-growth stock would likely have further to fall once hitting the over-the-counter market.

Jon Quast owns shares of Nasdaq. The Motley Fool owns shares of and recommends Luckin Coffee Inc. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.

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