Luckin Coffee, which was delisted due to a counterfeiting scandal, wants to make a comeback? 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.
The picture shows Luckin Coffee on the NASDAQ screen in Times Square in January 2020
As soon as the news came out, the relevant person in charge of Luckin Coffee immediately responded to the small editor of the business that the report was untrue.
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, whether it is personnel adjustment or business expansion, Luckin Coffee has not stopped, including focusing on the development of the core business of coffee, attracting franchisees from lower-tier cities to join in the form of zero franchise fees, closing 1021 underperforming stores, etc., while still applying for bankruptcy protection and negotiating with its stakeholders on the company's financial restructuring. All these measures almost all happened at the same time after delisting, which can be described as rapid and decisive.
Perhaps, Luckin Coffee, which is in the storm, is also very clear that it has reached the company's darkest moment, and if it is slightly lost, the big ship of business is likely to capsize and collapse, and it is difficult to recover.
The market is also very concerned about how Luckin Coffee recovers and whether it can really achieve a turnaround. 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.
The methods of opening stores that were once crazy and expanding have gradually become "rational". After Luckin Coffee closed 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.
The rising revenue and number of stores also prove that the Luckin brand still has influence in market penetration and consumption attraction, and has not been completely marginalized by users.
In addition, in the entire company management, Luckin Coffee has disclosed the development process many times before, including restructuring plans, "poison pill plans" and so on. Proposed resolutions submitted to the General Meeting of Shareholders for shareholder approval, 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.
Even if Luckin Coffee really had the idea of returning to nasdaq, it was not impossible.
Wen Zhihong, 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 whether investors are willing to give Luckin Coffee another chance has become difficult to judge, after all, the fraud scandal has caused a lot of 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 losses. 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 old rivals such as Starbucks and CostaCoffee, there are more and more Internet celebrity coffee brands, and "Luckin" is no longer synonymous with Internet celebrity coffee.
New entrants Yongpu Coffee, Three and a Half Meals, and Shicui SECRE also began to reach out offline, revealing their ambitions for store expansion. Internet celebrities who started with a more trendy marketing method, a new experience and concept are not much inferior to the achievements of their predecessors.
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 brand differences 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.
In other words, even if investors believe that Luckin Coffee will not make the mistakes it once made and operate honestly, in the current market of tea brands, it is not so easy for Luckin Coffee to come up with a new story to persuade investors to pay money.
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The text | He Qian
Editor| Kong Yaoyao
Image source| Luckin Coffee Official Micro, Visual China, Starbucks Official Micro