LKNCY Stock: Hard-Hit Luckin Coffee Could Brew Gains Thanks to This Big News

Chinese coffee retailer Luckin Coffee (OTCMKTS:LKNCY) was at a boiling point last year with its financial troubles. But now, as two of the company’s major investors steep more money in the business, LKNCY stock could be seeing some upward momentum.

Four Luckin Coffee (LK) coffee cups are arranged in a row.

Source: Keitma / Shutterstock.com

This time last year, Luckin was seeing plenty of trades on the Nasdaq Exchange, and was sitting pretty with a share price near $40. However, the stock crashed and burned when it came to light that the company was lying about revenues and losses. It was not just fudging some numbers either; executives overstated figures by hundreds of millions of dollars. Obviously, when this came to light, LKNCY stock tanked.

As a result of this massive scandal, the SEC delisted Luckin from the Nasdaq. In the months since then, Luckin has been trying to find money to settle with the SEC and restructure. It looks like its time has come, thanks to two big cash injections by some existing shareholders.

Centurium Capital and Joy Capital are the two firms responsible for the company’s coming debt elimination. The two shareholders have given Luckin a $260 million investment, structured as convertible preferred stock. Luckin will use this money to pay off the $180 million settlement it has with the SEC. It has also announced the replacement of the its independent auditor.

What Comes Next for LKNCY stock?

The next step for the coffee retailer is the necessary restructuring it must undergo. The remaining funding will allow the company to focus on fulfilling the obligations set for it by the SEC and to keep its head down and execute its business plan without further hitches. Ultimately, the company is striving to find a relisting in the near future.

The news is very good for Luckin and LKNCY stock. However, it may be too little, too late. Investors are largely fed up with the company after the scandal, and many InvestorPlace contributors are set in their beliefs that Luckin’s second chances are up. Only time will tell, though, and the company is obviously not going down without a fight.

On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article.


Article printed from InvestorPlace Media, https://investorplace.com/2021/04/lkncy-stock-hard-hit-luckin-coffee-could-brew-gains-thanks-to-this-big-news/.

©2021 InvestorPlace Media, LLC