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Luckin Coffee Inc – ADR (OTC:LKNCY), which trades as an over-the-counter stock, is plunging hard Friday following an announcement from the company regarding a Chapter 15 bankruptcy filing.
What Happened: Luckin said that a verified petition under Chapter 15 of title 11 of the U.S. code has been filed on its behalf with the U.S. Bankruptcy Court for the Southern District of New York.
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The petition, the company said, seeks, among other things, recognition in the U.S. of its provisional liquidation pending before a Cayman Islands court and related relief.
Following the unearthing of financial improprieties in April 2020, the company came under regulatory scrutiny and its shares were subsequently delisted from Nasdaq.
What Is Chapter 15 Bankruptcy? Chapter 15, a newer chapter added to the Bankruptcy Code in 2005, is the domestic adoption of Model Law on cross-border insolvency framed by the U.N. Commission on International Trade Law.
It serves to promote cooperation between the U.S. courts and parties of interest and the courts and other competent authorities of foreign countries involved in cross-border insolvency cases. Additionally, it affords protection and maximization of the value of the debtor's assets, and facilitate the rescue of financially troubled businesses, thereby protecting investment and preserving employment.
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Related Link: Luckin Coffee Short Sellers Make $1.1B In Profits As Shares Continue Plummet
What's Next For Luckin: Luckin said it is negotiating with its stakeholders regarding the restructuring of its financial obligations to strengthen its balance sheet and enable it to emerge from the Cayman Proceeding as a going concern for the benefit of all stakeholders.
The Cayman proceedings commenced in July 2020.
The relief sought in the Chapter 15 Petition, the company said, will promote centralized administration of the its assets by permitting coordination between the Cayman Court and the U.S. Bankruptcy Court, to protect the interests of stakeholders while facilitating its restructuring.
Luckin said all company stores will remain open for business to its customers in China, and that the Chapter 15 filing is unlikelyto impact its day-to-day operations.
"The company continues to meet its trade obligations in the ordinary course of business, including paying suppliers, vendors and employees," according to Luckin.
LKNCY Price Action: At last check, Luckin shares were sliding 36.97% to $8.08.
Related Link: What's Behind The Luckin Coffee Rally?
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.