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Luckin's Founder Faces More Trouble After Fraud Scandal

By Jennifer Saibil - Jun 2, 2020 at 12:09PM

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Charles Lu is selling his share of China's biggest car rental company after its share price dropped from the Luckin impact.

Luckin Coffee's (LKNC.Y -1.86%) inflated-revenue scandal is still making waves weeks after first being reported. Charles Lu, co-founder and chairman of the company, is selling his shares in the Hong Kong-listed Car Inc., where he also serves as chairman, because the Luckin story has affected share value.

Adding more woes to the tale

In addition to other holdings, Lu's investment firm, UCAR, had large holdings of Car Inc. It had sold 17% to a Warburg Pincus group in April and is now selling its remaining 21.26% share to Beijing Automotive. Although the amount of this sale wasn't disclosed in the exchange filing on Monday, the shares are worth about $129 million according to their current market value.

Two cups of coffee.

Image source: Getty Images.

Car Inc.'s share price fell 54% in April after the Luckin news broke. It soared 24% in trading after the news about the sale came out on Monday.

Legend Holdings, China's largest investment firm, is currently the largest shareholder in Car Inc., with 26%.

More trouble on the way

Even after divesting its shares of Car Inc., Lu will continue to feel the heat from the Luckin debacle. Credit Suisse bankers are also on his back about $500 million worth of loans that went bad after the Luckin story came out and are taking it to the courts to recoup the losses. 

Luckin is back on the Nasdaq after being delisted in April. It's lost 94% of its value year to date and is trading at $2.25 as of this morning.

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Luckin Coffee Inc. The Motley Fool has a disclosure policy.

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