With Bankuptcy Behind it, Is it Safe to Take a Sip of Luckin Coffee Stock?

Luckin Coffee Stock - With Bankuptcy Behind it, Is it Safe to Take a Sip of Luckin Coffee Stock?

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For unlucky investors of Luckin Coffee (OTCMKTS:LKNCY), there is finally some positive news that could give Luckin Coffee stock the caffeine boost it desperately needs. The dreaded B-word, bankruptcy, has dogged LKNCY stock holders for quite a while. Now, however, Chapter 15 could be the investors’ favorite part of Luckin’s ongoing story. As many InvestorPlace contributors have covered, Luckin Coffee officially filed for Chapter 15 bankruptcy protection on Feb. 5, 2021. At the time, it felt like the final nail in the coffin for a promising China-based coffee chain.

The events that led up to that gut-wrenching moment are somewhat unsettling. In early April 2020, it was revealed that some of the people at Luckin Coffee had fabricated transactions and inflated the company’s sales figures. Then came the fines. Specifically, Chinese regulators fined Luckin and a number of connected firms a total of 61 million yuan. Additionally, Luckin Coffee paid a fine of $190 million to the Securities and Exchange Commission for its revenue overstatements. So, it is easy to see why Chapter 15 bankruptcy proceedings might seem like the swan song for Luckin Coffee. Yet, this might actually be a positive development for the company.

On Apr. 11, Luckin Coffee announced that it had successfully emerged from all of its Chapter 15 bankruptcy proceedings. With that, the company had finally restructured its financial debt — at least, in the U.S. Luckin Coffee Chairman and Chief Executive Officer (CEO) Jinyi Guo spun this event in a positive light, as you might expect. “Today marks a new beginning for Luckin Coffee […] As we have emerged from this process successfully with the support of our creditors, we are confident that Luckin Coffee is well positioned for long term growth and creation of stakeholder value,” Guo declared.

Maybe this talk of a “new beginning” isn’t just hollow CEO-speak. After all, now that Luckin Coffee has the Chapter 15 monkey off of its back, the company can concentrate on its business operations. Besides, Luckin has had pretty good luck lately, fiscally speaking. In the fourth quarter of 2021, the company grew its revenue by more than 80%. Furthermore, the company’s fiscal-year 2021 net revenues nearly doubled year-over-year.

So, just maybe, Luckin Coffee will emerge bruised, but not broken. With that in mind, intrepid investors can consider a long position in LKNCY stock. Just be sure to treat this investment like a strong cup of coffee — best taken in moderate doses.

On the date of publication, David Moadel 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.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


Article printed from InvestorPlace Media, https://investorplace.com/2022/04/with-bankuptcy-behind-it-is-it-safe-to-take-a-sip-of-luckin-coffee-stock/.

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