Today, Luckin Coffee (OTCMKTS:LKNCY) is among the many Chinese stocks getting hammered by the market. At the time of writing, LKNCY stock has dropped more than 12% as selling pressure picks up.
There are a number of general reasons why Chinese stocks are down today. Slowing domestic growth and a tightening regulatory landscape have been weighing on LKNCY and its peers. And of course, Luckin Coffee has had its own unique set of challenges over the years. An accounting scandal, in which the company misstated revenue, has hurt this stock significantly.
It’s a rough environment for any Chinese company these days. Indeed, one of the biggest headwinds investors are pricing into these stocks is the potential for delisting from U.S. exchanges. While Luckin is traded on the over-the-counter market, this company did have hopes of relisting in the U.S. Those hopes appear to becoming less and less likely of late.
With all these headwinds in mind, there’s another issue on the minds of investors today. Let’s dive into what’s moving Luckin Coffee so violently right now.
LKNCY Stock Nosedives on Shenzhen Lockdown
Today, reports that Chinese tech hub Shenzhen has been locked down by the Chinese government, following the worst outbreak of Covid-19 in two years in the country, has investors in all Chinese stocks feeling highly uncertain. This lockdown reportedly affects more than 17 million people, along with a range of businesses that rely on this population.
Luckin Coffee is one such company. Right now, it’s unclear what the ultimate impact of this lockdown will be on Luckin. However, as a consumer-facing brand, the market is taking this news very bearishly. And rightfully so.
Accordingly, right now, it appears to be a very difficult time to be an investor in Chinese stocks. When this situation will turn around remains to be seen. Accordingly, without any light at the end of this tunnel, investors are moving on to other areas of the stock market today.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.