Please ensure Javascript is enabled for purposes of website accessibility

Luckin Coffee Board to Meet on Removing Chairman

By Eric Volkman – Jun 27, 2020 at 9:22AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The move comes not long after the beleaguered company jettisoned its CEO and COO.

The saga that is Luckin Coffee (LKNC.Y 0.55%) has taken yet another turn.

On Friday, the China-based company issued a press release stating that its board of directors aims to remove Charles Zengyao Lu as its chairman and board member, in accordance with its articles of association. The board has scheduled a meeting for next Thursday, July 2, to consider -- and presumably vote on -- the proposal.

Lu's resignation has been requested by a majority of the board's members. It is based on recommendations from the board's special committee, which in turn stems from an internal investigation on the company's accounting scandal. The company's COO at the time, Jian Liu, allegedly inflated the company's 2019 revenue by the equivalent of around $309 million. This was the matter that tarnished the company's reputation.

Well dressed man crushing a cup of coffee.

Image source: Getty Images.

Since then, things have gone from bad to worse. In April, a syndicate of banks seized almost 611 million Luckin Coffee shares held by a company controlled by chairman Lu, after the company defaulted on a $518 million margin loan.

Shortly after that, Luckin Coffee fired both controversial COO Liu and CEO Jenny Zhiya Qian.

And earlier on the same day the board's meeting on Lu's fate was announced, Nasdaq suspended the company's shares from trading on the exchange. The move will come into force this Monday, June 29, and will ultimately lead to delisting.

Understandably, Luckin Coffee's shares dropped off a cliff on Friday. They declined a whopping 54% on the day, a far steeper fall than even the hardest-hit consumer goods companies, not to mention the broader stock market in general.

Eric Volkman 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Luckin Coffee Inc. Stock Quote
Luckin Coffee Inc.
LKNC.Y
$16.50 (0.55%) $0.09

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.