Rumored plans to re-list nasdaq Will Luckin be able to return to the top

On January 20, the market broke the news that Luckin Coffee was studying plans to re-list on the NASDAQ, which may be carried out as soon as the end of this year. In response to this news, the relevant person in charge of Luckin Coffee responded to the Beijing Business Daily reporter that the report was untrue.

After being exposed to data fraud in April 2020, Luckin Coffee was caught in a series of storms such as delisting, leadership change, and heavy fines, but on the other hand, it was also struggling to save itself in the change to adjust the store to find a sustainable profit path. Despite the negatives, Luckin Coffee strives not to be forgotten and abandoned by the market. However, if you want to return to the peak of the past listing, it may have become the biggest unknown. This not only involves the sustainable profitability of the company's business model, but more importantly, how can Luckin Coffee re-establish the broken trust of investors after the fraud?

Denial of listing plans

Planning a return to nasdaq? On January 20, for market rumors, Luckin Coffee quickly debunked and denied them to the outside world.

Counting carefully, nearly two years have passed since Luckin Coffee exposed its financial fraud of 2.2 billion yuan in April 2020 and was forcibly delisted in June of the same year. During the period, despite the twists and turns after delisting and the negative news, Luckin Coffee is still trying its best to quickly cut through the mess and get the company back on track.

For example, during the Spring Festival in 2021, Luckin Coffee was exposed to the "palace fight drama", and dozens of middle and high-level personnel of the company reported the new chairman and CEO Guo Jinyi in the form of a joint letter, and Guo Jinyi broke the news that the whistleblower letter was organized and drafted by Lu Zhengyao, Qian Zhiya and other organizations. Subsequently, a month later, the board of directors investigation team said that it had not found guo Jinyi to have misbehaved, and a number of senior executive positions that were "forced to the palace" were adjusted. On the same day, Guo Jinyi announced a series of structural adjustments to appoint and sort out the company's business, operation, finance and other lines.

It can be said that in the months after the setbacks of delisting and the company's scandal, Luckin Coffee has not stopped: focusing on the development of the core business of coffee; attracting franchisees from lower-tier cities to join with zero franchise fees; filing bankruptcy protection and negotiating with its stakeholders on the company's financial restructuring; closing 1,021 underperforming stores... All kinds of measures are quickly decided in the midst of turmoil.

Fulfilling liabilities, abandoning excess business, and rationalizing structural regulations, everything is proceeding in parallel, and the company's way forward has become much clearer. Perhaps, Luckin Coffee, which is in the storm, is also very clear that in any case, the big ship of business cannot be overturned.

Trying to "turn over"

Judging from the financial report released by Luckin Coffee, the brand still has a certain influence in market penetration and consumer attraction. According to the unaudited financial report for the third quarter of 2021, luckin coffee's total net income was 2.35 billion yuan, an increase of 105.6% year-on-year, while the losses and expenses related to the previous financial fraud event and restructuring were 75.5 million yuan, down 62.6% compared with 202 million yuan in the same period last year.

In terms of stores, Luckin Coffee, which once blindly opened stores, has gradually become "rational". After closing thousands of stores, as of the end of the third quarter of 2021, the total number of coffee stores reached 5671, of which self-operated stores increased by 6.4% year-on-year to 4206, and franchised stores increased by 66.7% year-on-year to 1465.

In addition, in the management of the entire company, Luckin Coffee has disclosed the development process many times before, including luckin coffee restructuring plan, "poison pill plan" and so on. Among them, the proposed resolution submitted to the shareholders for approval at the general meeting of shareholders, as well as the outline and rules of the articles of association of the company as amended and restated for the fifth time. These proposed measures are designed to protect the long-term viability of the company by restricting the ability of former fraudulent management to obtain equity in the company, thereby restricting them from influencing the company in a direct or indirect manner.

Wang Zhendong, chairman of Shanghai Brown Yue Investment Management Co., Ltd., believes that in fact, luckin coffee's products, performance and operational performance in the past two years have better eliminated investors' concerns, and if Luckin Coffee considers re-listing, this is also one of the important reasons.

Can highlight moments be returned

In fact, in the eyes of some practitioners, if Luckin Coffee really has the idea of returning to nasdaq, it is not an exaggeration. Wen Zhihong, a partner and head of chain operations at Hejun Consulting, believes that if Luckin Coffee has the will and meets the requirements of NASDAQ's re-listing, it is possible to achieve this goal. But how to rebuild the trust of investors is the most critical.

"To regain the trust of investors, I think we need to reinvent ourselves in at least two ways. The first is the company's governance structure, which needs to find a more reasonable way of corporate governance to ensure orderly development and honest management, and the financial fraud exposed before is a problem at the level of corporate governance. Secondly, Luckin Coffee needs to speak with performance and prove to the capital market that the business has great prospects. Wen Zhihong believes that as to whether investors are willing to give Luckin Coffee another chance, it has become difficult to judge, after all, the fraud scandal has caused great harm to investors.

On the one hand, Luckin Coffee must make greater efforts to repair the trust rift with the capital market, on the other hand, it is difficult to hide its annual expanding loss situation. When it will be fully profitable, Luckin Coffee is still undecided. According to the financial report, in 2020, 2019 and 2018, the net loss of Luckin Coffee was 5.603 billion yuan, 3.161 billion yuan and 1.619 billion yuan respectively, and the cumulative loss in three years exceeded 10 billion yuan.

Nowadays, in addition to Veterans such as Starbucks and CostaCoffee, Internet celebrity brands such as Yongpu Coffee, Three and a Half Meals, and Shicui SECRE have also begun to reach out to the offline, revealing their store expansion ambitions. The track is becoming more and more crowded, which also confirms the limited cost of the coffee threshold from the side. Where is the core competitiveness of such vertical drinks, how to get out of the brand difference and continue to improve user stickiness and repurchase rate, so as to form a stable profit model, the industry is still in a period of exploration.

Next, Luckin Coffee needs to consider how to enhance the product strength into an innovation chain and form an institutional mechanism for continuous innovation. In addition, how to upgrade the original consumer Internet platform into an industrial Internet platform and effectively integrate the resources of the industrial chain. Wang Zhendong said.

Beijing Business Daily reporter Guo Binlu He Qian