Luckin Coffee’s board is forcing out its chairman (also, chairman is forcing out the rest of the board)
Sometimes you just can’t get a [L]uckin’ break.
After announcing this morning that it is ending its fight to stay listed on Nasdaq, China-based coffee chain and delivery company Luckin Coffee announced in a filing with the SEC that it is requiring that its chairman, Lu Zhengyao, resign.
It also announced in its SEC filing that the chairman has requested the firing of independent director Sean Shao through a shareholders resolution, which will be voted upon at a shareholders meeting to be held on Sunday, July 5th.
It’s getting ugly at Luckin, which is struggling to turnaround in the aftermath of revelations of a $300 million accounting fraud that has seen its stock price plummet in recent months. Shao has been leading the board’s independent investigation over the accounting irregularity.
Now, at a shareholders meeting, the board will be up for grabs, with investors in the company (yes, there are still investors!) choosing who to keep and who to fire in a devolving case of corporate governance run amok.
In addition to voting on several current directors of the company, shareholders will also vote on installing two new independent directors, Zeng Ying and Yang Jie, who have longtime business and legal backgrounds.
We had previously known about the extraordinary shareholders meeting, but now the company has upped the ante, by voting to force out the chairman by July 2 — three days before the shareholders meeting is scheduled to take place.
Honestly, at this point, it’s impossible to say what comes next. But what I can say is that Luckin is currently trading down 54% at close this Friday, and is worth barely a few hundred million dollars — down from its peak market cap of over $12 billion. Whoever wins is going to own some truly empty cups.