Luckin Coffee Inc LKNCY is among a group of 45 companies fined $8.98 million for falsification of financial records and misleading the public by China’s market regulator, Reuters reported Monday.
What Happened: The market regulator said its investigations established that the coffee chain violated Chinese laws and misled the public, according to Reuters. The company is alleged to have faked statistics and inflated its operational data between August 2019 to April this year.
Two Luckin entities among a total of 43 companies were also reportedly fined for being hand-in-glove with the Xiamen, China-based coffee drinks retailer.
Luckin said on Weibo it had carried out an “overall rectification on the related issues.”
“We will further improve our operations according to related laws and regulations,” it added, as reported by Reuters.
Why It Matters: In July, Luckin ousted its chairman Charles Zhengyao Lu after previous efforts failed.
An internal investigation had revealed that Lu had knowledge of the fabricated transactions but failed to disclose them.
The Chinese rival of Starbucks Corporation SBUX had revealed in April that Liu and several employees had fabricated transactions to the tune of $310 to boost the company’s sales.
Trading in Luckin shares was suspended the same month on the Nasdaq Stock Market. Short-seller Citron Research, a long-term backer of the coffee chain company, said at the time that the event eroded investor trust in the U.S.-listed Chinese companies.
In May, the U.S. Senate passed a bill that seeks to delist Chinese companies, unless they manage to prove they aren't owned or controlled by a foreign government.
Price Action: Luckin OTC shares closed 0.39% higher at $2.6 on Monday.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
