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Report: Luckin Coffee Hires Financial Advisor Experienced in Distressed Situations

By Eric Volkman – Jun 23, 2020 at 7:27PM

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The company has apparently retained Houlihan Lokey to help it with financial and strategic matters.

Battered by missteps and bad news of late, it seems Luckin Coffee (LKNC.Y 2.65%) is turning to a third party for some help. Reuters is reporting that the Chinese takeout java specialist has hired Los Angeles-based investment bank Houlihan Lokey (HLI 5.86%) as an advisor.

The article, citing "sources close to the matter," states that Houlihan Lokey will provide strategic and financial advice for Luckin Coffee. It was not clear how much the Asian company will be paying for such services.

Rocked by several scandals involving alleged accounting fraud and loan defaults by some of its top executives, the onetime investor favorite has seen its market value plunge lately.

Coffee spilling from a cup.

Image source: Getty Images.

Luckin Coffee's most recent headache is the real threat its stock will be delisted; earlier on Tuesday Nasdaq sent its second notice on the matter. It cited the company's failure to file its 2019 annual report as grounds for delisting. Addressing that matter, Luckin Coffee said the delay was due to the COVID-19 pandemic, and an ongoing internal investigation into that accounting scandal.

Houlihan Lokey, a veteran in the financial services space, does a brisk business advising not only companies, but also government organizations. It has particular experience advising entities that are in bad financial straits.

Neither Luckin Coffee nor Houlihan Lokey has yet commented on the Reuters article.

On Tuesday, in sharp contrast to the gains enjoyed by the broader stock market and numerous fellow consumer goods stocks, Luckin Coffee shares dived by more than 12%. Houlihan Lokey declined marginally on the day.

 

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Houlihan Lokey and Luckin Coffee Inc. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Luckin Coffee Inc. Stock Quote
Luckin Coffee Inc.
LKNC.Y
$16.67 (2.65%) $0.43
Nasdaq, Inc. Stock Quote
Nasdaq, Inc.
NDAQ
$59.90 (2.69%) $1.57
Houlihan Lokey, Inc. Stock Quote
Houlihan Lokey, Inc.
HLI
$81.18 (5.86%) $4.49

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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