||In re Luckin Coffee Inc. Securities Litigation
||United States District Court for the Southern District of New York
||Honorable John P. Cronan
||Sjunde AP-Fonden and Louisiana Sheriffs’ Pension & Relief Fund
Luckin Coffee, Inc. (“Luckin” or “the Company”), Charles Zhengyao Lu, Jenny Zhiya Qian, Jian Liu, Reinout Hendrik Schakel (collectively “Executive Defendants” and together with Luckin, “Exchange Act Defendants”).
Hui Li, Erhai Liu, Jinyi Guo, Sean Shao, Thomas P. Meier (collectively “Director Defendants”).
Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC, China International Capital Corporation Hong Kong Securities Limited, Needham & Company, LLC , Haitong International Securities Company Limited, & KeyBanc Capital Markets Inc. (collectively, “Underwriter Defendants”).
||May 17, 2019 – April 1, 2020
This securities fraud class action arises out of Defendants’ misrepresentations and omissions concerning the financial status of the Chinese coffee company Luckin Coffee, Inc. During the class period, Luckin promoted a sales model wherein it would operate at a loss for several years for the purpose of gaining market share by opening thousands of app-based quick -serve coffee kiosks throughout China. Between 2017 and 2018, Luckin claimed its number of stores increased from just nine to 2,073 stores. It also claimed that its total net revenues grew from $35,302 to $118.7 million in that same period.
On May 17, 2019 Luckin, through an initial public offering (IPO) offered 33 million ADSs to investors at a price of $17.00 per ADS, and reaped over $650 million in gross proceeds. On January 10, 2020 Luckin conducted an SPO of 13.8 million ADSs pried at $42.00 each, netting another $643 million for the company. Unbeknownst to investors, however, Luckin’s reported sales, profits, and other key operating metrics were vastly inflated by fraudulent receipt numbering schemes, fake related party transactions, and fraudulent inflation of reported costs, among other methods of obfuscating the truth. Following a market analyst’s report wherein the sustainability of Luckin’s business model and the accuracy of its reported earnings were challenged, after conducting an internal investigation, Luckin ultimately admitted to the fraud.
Plaintiffs filed a 256 page complaint alleging violations of Section 10(b) of the Securities Exchange Act against the Exchange Act Defendants, violations of Section 20(a) of the Exchange Act against the Executive Defendants, violations against Section 11 of the Securities Act against all Defendants, violations of Section 15 of the Securities Act against the Executive Defendants and the Director Defendants, and violations of Section 12(a)(2) of the Securities Act against the Underwriter Defendants. As alleged, following a series of admissions from Luckin and Defendant Lu admitting the existence and scope of the fraud, Luckin’s share price dropped from $26.20 to $1.38 per share, before ultimately being delisted.
Luckin is currently undergoing liquidation proceedings in the Cayman Islands, where it is incorporated. Luckin also filed for Chapter 15 bankruptcy in the Southern District of New York. The Underwriter Defendants and Thomas Meier, an outside director filed motions to dismiss the Complaint which are pending. None of the Executive Defendants or any other Director Defendants have appeared in this Action and all are residents of the PRC. They were served pursuant to the Hague Convention.
On October 26, 2021, Lead Plaintiffs reached a $175 million settlement with Luckin to resolve all claims against all Defendants. More information regarding the settlement can be found here.
Read Consolidated Class Action Complaint Here
Read Order Granting Motion for Preliminary Approval Here