Determined from US stock markets during the summer of 2020 and full of corruption scandals regarding the succession of CEOs, Chinese coffee company Luckin Coffee (OTC: LKNC.Y) made the headlines again today, this time by filing Chapter 15 bankruptcy. The Associated Press reports that the company will keep its physical locations open during the bankruptcy process as it wants to transform itself into a viable business.
Luckin filed Chapter 15 bankruptcy because it is the kind available to foreign companies operating in the United States. A little over a month ago, the company agreed to pay a $ 180 million fine after the US Securities and Exchange Commission (SEC) accused him of paying $ 300 million in non-existent loans in 2019 and early 2020. sales added to its balance sheet. , also fined by the Chinese government, agreed to pay the SEC fine without acknowledging the charges.
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Luckin’s revenue appears to be growing steadily year-on-year, rising by 18.1%, 49.9% and 35.8% in the quarters ending March, June and September 2020 respectively. This amount is far below the growth of 300 to 500% that the company reported before the SEC accusations, but it seems that the company’s mix of self-managed locations and franchises can make a real profit.
While Luckin’s shares have meanwhile tumbled more than 46% since the competitive coffee chain opened in the market Starbucks (NASDAQ: SBUX) trades today at around 3.5%. The news of Luckin’s continuing problems could help Starbucks’ profits, but the latter also got an inch up from Gordon Haskett today. The analytics firm increased its buying price and improved its price target from $ 100 to $ 120, saying Starbucks should benefit significantly from an increasingly aggressive pursuit of competitive advantages in terms of digital, delivery, convenience, loyalty and stability of the workforce. ‘