Luckin Coffee Inc.'s (LK) stock plummeted 54% on June 26 as news emerged that the stock would cease to be part of Nasdaq from June 29. This is my third and probably final update on this troubled Chinese coffee retailer that still promises to become the Starbucks (NASDAQ:SBUX) of China. In my first article published in April, I suggested investors who bought Luckin Coffee stock at the highs of around $50 should wait for a better opportunity to liquidate their positions. Once the stock soared in the days that followed the resumption of trading, I published my second piece warning investors of the catastrophe that awaits and hinted that the stock could shed most of its value before the end of June as the delisting drama unveils. Luckin Coffee's management has decided to withdraw its request for a hearing in front of a Nasdaq panel in which the company executives were supposed to make a case for allowing the stock to trade on Nasdaq despite admitting to reporting fictitious revenue. The saga is now ending, as expected, with the eventual delisting of Luckin Coffee from Nasdaq. In this article, I will answer a few pressing issues about the future of the company and suggest the best course of action for an investor who still believes in the success of Luckin Coffee.To get more news about luckin coffee earnings, you can visit shine news official website.
What happens to Luckin Coffee's stock once the company is delisted from Nasdaq?
June 26 was the final day for investors to trade Luckin Coffee's stock on Nasdaq. When trading starts on Monday, June 29, the company would no longer be part of the prestigious Nasdaq index. As I noticed on many message boards, investors are confused about their ownership of the company. In fact, common shareholders would still remain owners of the company. Shares of Luckin Coffee will continue to trade in the OTC market just like many other famous companies such as Tencent Holdings Limited (OTCPK:TCEHY).
Will Luckin Coffee trade under the same symbol?
No. Generally, OTC equity issuers use either four or five letters as their ticker. Luckin Coffee is likely to have five letters in its new symbol and the fifth letter is, in fact, an additional letter used to describe the issuer of equity. For instance, the letter "P" indicates preferred shares. Going by the OTC market quoting system, Luckin Coffee is likely to use the letter "Y" as the fifth letter to indicate that the listing is of an American Depositary Receipt.
Why did the company decide to withdraw its request for a hearing?
At this point in time, I can only make an educated guess. Before I do, however, I encourage readers to take this as my opinion on the matter, which could be factually inaccurate.
First, there would have been no reason for the management to go back on their decision to request a hearing if the company had a concrete argument to be presented to the panel. The decision to withdraw the request and accept defeat, therefore, is an admission of guilt as far as I see it. This inability to defend themselves goes on to highlight the significance of the accounting scandal.
Second, I believe this decision might have been taken after carefully considering the regulatory benefits attached to OTC markets. Here's a snapshot of the reporting requirements applicable to companies that trade in the OTC market.