Shares of Luckin Coffee Inc. jumped almost 7% in the week to early Friday after the company announced $ 250 million in new investments and a new auditor, Centurion ZD CPA.
stated on Thursday that Centurium Capital has agreed to privately issue $ 240 million of the premium convertible preference shares, and Joy Capital has agreed to privately issue $ 10 million of the premium convertible.
The closure of these transactions will depend on Luckin’s $ 460 million restructuring in 0.75% convertible premium bonds that will mature in 2025.
“Luckin Coffee plans to use the proceeds from the investment to facilitate the company’s proposed offshore restructuring and fulfill its obligations under a recently announced agreement with the Commission. US Securities and Exchange Commission, ”the company said in the announcement.
“Transactions allow the company to focus on its balance sheet on continued execution of its business plan, on growing its core coffee business, and on achieving long-term growth targets. term ”.
Centurion ZD CPA succeeded Marcum Bernstein & Pinchuk LLP as an auditor at Luckin because “MarcumBP believes that they did not collect enough independent third-party data or performed enough audit procedures to complete the audit. based on certain areas identified in the company’s general IT controls for the year ended December 31, 2019, ”Luckin announced.
“Previous auditors seem to have resigned due to the inability to complete the audit. We have never seen a change in auditors for this reason ”.
Luckin said there was “no disagreement” and that the two accounting firms will exchange information to complete the audit for the year ended December 31, 2019. Luckin will also work with Centurion to submit their reports. year for the years ending December 31, 2019 and December 31, 2020. “the sooner the better.”
on the Chinese coffee market.
In early 2020, the allegations that Luckin had falsify financial and operational figures began to emerge. In April 2020, shares fell 75% after the company formed a special committee to investigate financial misconduct amounting to more than 310 million US dollars.
Quo Vadis Capital calls the dual investment and the new audit announcements “extraordinary”.
“Previously auditors seem to have resigned due to the inability to complete the audit,” Quo Vadis Chairman John Zolidis wrote in a note.
“We have never seen a change in auditors for this reason.”
Zolidis also notes that Luckin has managed to raise funds without a financial audit for 2019 or 2020.
“The share issue is positive news from the perspective it provides increased protection against unresolved shareholder lawsuits and the DOJ investigations are ongoing,” said Zolidis.
However, the company has business model issues that these latest announcements don’t address.
Shares of Luckin Coffee are up 6.8% for the week and are trading at just under $ 9. Quo Vadis said the company still faces issues of “balance sheet risk, burning cash, as well as a very limited visibility of operations”.
Quo Vadis reviews Luckin Coffee for sale.
Luckin shares are up 4.5% this year, while the S&P 500 index
increased by 11.2% during this period.