Luckin Coffee Reaches Preliminary Agreement Worth $175 million for Class Action Settlement
Reuters reported on Wednesday that Luckin Coffee Inc. has reached a $175 million settlement in its shareholder class-action lawsuit.
Lawyers for the shareholders called the all-cash settlement, filed on Monday night, an “excellent result,” citing Luckin’s liquidation proceeding in the Cayman Islands and its related filing for protection under the U.S. Bankruptcy Code. The agreement also involves Luckin’s executives, underwriters of the company’s $645 million IPO in 2019, and those who were involved in a later offering of the company’s American depositary shares.
US District Judge John Cronan in Manhattan approved the preliminary settlement agreement on Tuesday, and arranged a hearing on January 31, 2022 to consider final approval. The settlement also needs the approval of a Cayman Islands court.
In April 2020, Luckin was alleged to have committed financial fraud, an accusation that saw the company almost instantly descend from its rank of “fastest IPO in 18 months”. The company’s share price then plunged and was subsequently put under investigation by US regulators. The company’s stock was soon after removed from US market boards and its founding team ousted from their roles. In the past year, Luckin has refinanced, maintained business stability, and completed a series of optimizations and upgrades under the new head of the company.
On the evening of October 22, Luckin Coffee released its unaudited financial report for the first half of 2021, showing a net income of 3.183 billion yuan ($49.78 million) in the period, a significant increase of 106% compared with 1.545 billion yuan in the same period of 2020. As data shows, both revenues and losses have improved significantly compared with the same period last year. Among them, the store-side business turned losses into profits in the first half of 2021.