Please ensure Javascript is enabled for purposes of website accessibility

Luckin Shareholders Achieve What Board Could Not: Chairman Plus 3 Members Ousted

By Rich Duprey – Jul 6, 2020 at 9:09AM

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 scandal-ridden coffee chain failed to remove its chairman even though it had asked him to resign.

Luckin Coffee (LKNC.Y 0.55%) chairman Charles Zhengyao Lu survived one attempt to have him removed when the Chinese coffee shop's board failed to eject him from the scandal-scarred company, but shareholders who have seen their investment all but wiped out did the deed.

Bloomberg reports an extraordinary shareholders meeting held in Beijing on Sunday saw investors vote to remove Lu from his position along with three other directors, a rarity for companies in China.

Coffee pot on top of coffee beans

Image source: Getty Images.

Taking matters into their own hands

The board of directors conducted an internal investigation into accounting fraud and found sales had been inflated by $300 million and expenses were falsely increased by $190 million. Although they asked the chairman to resign, they could not achieve the two-thirds majority necessary to remove him after he refused to voluntarily step down.

Lu is the founder and controlling shareholder of Luckin, and also founded auto-rental company CAR and Chinese rideshare company Ucar.

Luckin has fired its CEO, COO, and some employees who reported to them who participated in the scheme, and has said it plans to fire as many as 12 additional workers and discipline 15 others caught up in the fraud.

In addition to removing the chairman and directors, shareholders also voted to install two independent directors to the board, Ying Zeng and Jie Yang.

Shares of Luckin Coffee debuted on the Nasdaq exchange a little over a year ago and rocketed to $51 a share as it was seen as the answer to Starbucks in China.

The stock has since lost 94% of its value and was delisted from the Nasdaq exchange. It now trades over the counter for around $2.50 per share.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Luckin Coffee Inc. and Starbucks. 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.
$16.50 (0.55%) $0.09
Starbucks Corporation Stock Quote
Starbucks Corporation
$84.26 (-2.67%) $-2.31

*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
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/02/2022.

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.