Defaulted on debts, Luckin Coffee Chair surrenders company shares as collateral



by   |  VIEW 563

Defaulted on debts, Luckin Coffee Chair surrenders company shares as collateral

On Monday, the 6th of April 2020, less than two trading days after the rapidly growing Chinese coffee chain start-up, Luckin Coffee had shrugged off nearly 81 per cent of its market cap following reveal of an internal financial fraud conducted by the company COO (Chief Operating Officer) and other employees, the Chair of Luckin Coffee Charles Zhengyao alongside the company Chief Executive Zhiya Qian had handed over the shares of Luckin Coffee to lenders, one of the lenders involved in a surprisingly outperforming US IPO of Chinese Coffee chain operator had unveiled.

More importantly, latest decision from the company Chair, Charles Zhengyao, 51, a Chinese billionaire businessman, came forth after another company owned by Zhengyao’s family had become defaulted being botched to pay off a $518 million in margin loans.

Besides, Luckin Chain, which said later last week that much of its 2019 sales were made-up, eventually plunging its market cap by 81 per cent as beforementioned and initiating a financial probe by the China’s securities regulators, had pledged 95,445,000 Class A shares and 515,355,752 Class B shares of Luckin Coffee including additional shares offered by the family trust of the company Chief Executive Qian, in order to settle the debts, one of the lenders overseeing the loans, Goldman Sachs Group Inc.

wrote in a client note on Monday (April 6th) and proposed a sale of the shares. On top of that, during preparation of the report, US afternoon trading hours, the Luckin Coffee shares’ which went through a vicious sell-off later last week, had been trading 18.40 per cent lower to $4.39 a share.