Author | Chen Zhongshan
Cover | Luckin official website
Luckin Coffee (hereinafter referred to as "Luckin"), which has just been on the hot search because of the first batch of signed Gu Ailing as a spokesperson, also ushered in an important moment of delisting for more than 600 days more than ten days ago.
On January 27, Dapu Capital announced that the buyer's consortium led by it had acquired a total of 384 million shares of Class A common shares from Lu Zhengyao, former management of Luckin and Qian Zhiya affiliates, and obtained more than 50% of luckin's voting rights and became the actual controller. This means that Lu Zhengyao may officially withdraw from the Luckin equity war, before that, after being "kicked" out of the board of directors by Dapu Capital and others in 2020, Lu Zhengyao has never stopped "counter-attacking".
On February 4 during the Spring Festival, there was another piece of good news about Luckin, which filed with the U.S. Securities and Exchange Commission (SEC) showing that the U.S. court had agreed to reckon paying a fine of $180 million (about 1.15 billion yuan) to the SEC for financial fraud. Combined with the 61 million yuan that has been fined in China before, and the $187.5 million (about 1.19 billion yuan) settlement fee with the US class plaintiffs, Luckin has basically "bagged the burden" of the historical problem of financial fraud at a huge cost of 2.4 billion yuan.
Luckin's corporate operations have taken a turn for the worse, and there are already signs in 2021. Last year's Q3 financial report showed that Luckin's net loss was 23.5 million yuan, narrowing by 98.6% from the same period in 2020, just one step away from profit. Moreover, in the first three quarters of 2021, Luckin's net revenue was 5.533 billion yuan, and the first three quarters have exceeded the full year of 2020.
At this point, "everything is ready only owes the East Wind", and Ruixing, which is currently delisted in the powder single market (the lowest level of the US stock over-the-counter market), has reached the juncture where it can "kill" the NASDAQ again. The equity "dark war" behind this has never stopped, thrilling and fierce.
Re-planning to go public, see KPMG's face?
Right now, the biggest impact on Luckin's return to nasdaq comes from a move by KPMG, the debt custodian of Luckin's restructuring, at the end of December 2021.
At that time, at the "Luckin Coffee Debt Restructuring Hearing" held in the BVI (British Virgin Islands) court, KPMG raised objections to the winding-up procedure of the debt restructuring. As a debt custodian, KPMG holds and is responsible for handling luckin shares of former executives such as Lu Zhengyao, which are liquidated due to debt, accounting for about 20% of the total equity, and its opinion is crucial.
Under KPMG's objections, the final deadline for Luckin's restructuring agreement was postponed from 31 December 2021 to 30 June 2022, which also postponed the time for Luckin to restart the listing. In theory, KPMG could repeatedly vote against it, making Luckin's debt restructuring time long.
KPMG's move is considered by the industry to have Lu Zhengyao's factor. Because KPMG is hosting the shares of Luckin controlled by former executives such as Lu Zhengyao.
This matter can be traced back to before 2020, when Lu Zhengyao, who was the chairman of Luckin at the time, adopted the method used in previous entrepreneurship to pledge the equity of Luckin held by the offshore company, so as to obtain the possibility of cashing out. According to the SEC, Lu Zhengyao pledged part of luckin's equity to Credit Suisse through his investment institution, thus borrowing hundreds of millions of dollars.
In April 2020, the Luckin counterfeiting incident broke out, and the stock price fell sharply, resulting in the inability to repay the loan of the equity pledged by Lu Zhengyao Offshore Company. Credit Suisse filed a lawsuit and, in court order, offshore companies that directly held Luckin's equity were liquidated in July, and KPMG became the custodian of those shares. However, after Luckin's delisting, the value of these pledged shares is even less than enough to offset outstanding debts.
KPMG represents the interests of creditors, and for it, debt restructuring needs to be delayed by raising objections in exchange for chips to maximize the interests of creditors. Objectively, KPMG has become a supporter of former Luckin executives such as debtor Lu Zhengyao.
However, Lu Zhengyao was unable to return to heaven, and after the offshore company he used to hold Luckin's equity was liquidated by the court, his control over Luckin was also lost.
In July 2020, Lu Zhengyao just lost control, when Luckin's largest shareholder, Dapu Capital, and the second largest shareholder, Joy Capital, joined hands to "kick" Lu Zhengyao, Qian Zhiya and other former Shenzhou executives out of Luckin, and cut off from the "fraud" incident, indicating that they were unaware of financial fraud.
For Lu Zhengyao, this is a cold and ruthless abandonment by capital, and before that, these capitals were "warm", and even the "iron triangle" of repeated cooperation with Lu Zhengyao.
A bloody battle between the "Iron Triangle"
Resolutely cut with Lu Zhengyao, Li Hui of Dapu Capital and Liu Erhai of Joy Capital, once a good friend of Lu Zhengyao, the cooperation of the "Iron Triangle", has successively sent companies such as Shenzhou Car Rental, Shenzhou Chauffeur, luckin coffee and other companies into the capital market.
Lu Zhengyao's "Lu's playing method" in the capital market - seizing the outlet, financing, burning money to expand, rapid IPO, and finally cashing out at a high point, also has a close relationship with Li Hui and Liu Erhai. According to the surging news, Dapu Capital had sold a considerable number of stocks before luckin's financial fraud was exposed, and basically got back the investment.
Lu Zhengyao was kicked out of the board by his former business partners Li Hui and Liu Erhai, and he was not convinced. In order to regain control, Lu Zhengyao continued to "make moves" and launched at least two waves of counterattacks.
The first wave was a direct shock. In January 2021, a "joint whistleblower letter" signed by an executive of Luckin Appeared accusing Guo Jinyi, who succeeded Lu Zhengyao, of corruption and party rivalry, and collectively requesting the board of directors and shareholder Dapu Capital to remove Guo Jinyi.
In this regard, Guo Jinyi issued an internal letter of all employees to fight back, pointing out that the whistleblower letter was organized and drafted by Lu Zhengyao, Qian Zhiya and other organizations, and the joint signatories were wrapped up in it.
Guo Jinyi set up an investigation committee, hired outside lawyers and accounting experts to investigate, and finally returned his innocence. After that, Guo Jinyi cleaned up Lu Zhengyao's old department, and also moved Ruixing's office from the Headquarters of UCAR founded by Lu Zhengyao, physically cutting off the connection with Lu Zhengyao and the Shenzhou Department.
Lu Zhengyao's second wave of counter-offensive was to use other investment institutions to "return to the curve".
In September 2021, the investment company controlled by Wumart founder Zhang Wenzhong began to participate in the debt restructuring of Luckin Coffee, intending to package and acquire the debt from Lu Zhengyao's creditor companies such as CICC, Barclays and Morgan Stanley, and some media reported speculation that Lu Zhengyao was behind it.
However, Wumei's public response to this at that time was that the information was untrue. A company called "China Guangshi International Investment Co., Ltd." directly contacted creditors in the name of Lu Zhengyao's related parties and tried to invest in Luckin in the form of debt-for-equity swaps.
In response to this wave of counter-offensive, Luckin passed the shareholders' equity plan (poison pill plan), and amended the company's articles of association against the old management, using double insurance to completely block lu Zhengyao's return opportunity. At that time, KPMG, which had some interests with Lu Zhengyao, also objected to this, but KPMG's influence in this matter was limited.
While blocking Lu Zhengyao's "return" with the help of capital, Dapu Capital is also attacking.
In April 2021, Dapu Capital led a US$240 million investment in Luckin, which landed in the form of subscriptions for senior convertible preferred shares, which will increase the voting rights of Dapu Capital to more than 45%, according to the announcement. At present, the voting rights of Dapu Capital have reached more than 50%.
In December 2021, GS Wealt, one of Luckin's investment institutions, said that Luckin may have signed a secret agreement with Okhiro Capital, thus increasing the voting power of the latter to nearly 60%.
Players in the game that cannot be ignored
In the battle for control of Luckin, although Guo Jinyi was pushed to the cusp of the storm, he was a person who was ignored on the issue of equity.
Guo Jinyi joined UCAR in 2016 as an assistant to Lu Zhengyao, chairman of UCAR Group. At the beginning of Luckin's founding, Guo Jinyi served as a senior vice president, responsible for products and supply chains. However, Guo Jinyi was not a close confidant of Lu Zhengyao.
After Guo Jinyi served as the chairman of Luckin, Luckin developed steadily. Snow Leopard Finance and Economics' previous "No bankruptcy, no selling, silent blood return: The secret of Luckin's self-help is hidden in this financial report" and "Big difficulty not to die, and then seek to go public? Ruixing City has changed the new king flag", which has been interpreted.
Guo Jinyi not only managed properly, so that Luckin gradually returned to blood, but also solved the problems left by Luckin's history and cleared the obstacles for Luckin's re-listing; moreover, Guo Jinyi, as the new chairman of Luckin, is also the trader of Luckin's future listing, which can be described as a key figure.
However, Guo Jinyi has very few shares in Luckin, and according to the late Late Post, as of July 2021, luckin's current management has only 1.37% of the shares and has no voting rights.
In order to motivate Guo Jin's first-class new management, in January 2021, Luckin's board of directors approved a new option plan, with the reserved option pool accounting for about 8% of the company's total equity to ensure that the long-term interests of management and the company are aligned. However, according to the plan, the 8% stake will be exercised many years later. In addition, even if Guo Jinyi obtains all 8% of the equity, it is still very small compared with the equity of Dapu Capital.
At present, due to the two common goals of confronting Lu Zhengyao and re-listing, Dapu Capital and Guo Jinyi can unite as one. However, once the re-listing is successful, can the two sides build deeper mutual trust? This will directly affect the confidence of the capital market in the company.
The majority of small and medium-sized shareholders are also a participant in the equity war of Luckin. Many small and medium-sized shareholders still choose to follow after Luckin's delisting, in the hope of enjoying the dividends of future re-listing and rising stock prices.
At present, minority shareholders are worried about whether Dapu Capital, which already controls Luckin, will take advantage of luckin's low stock price to privatize Luckin. On this concern, KPMG has to be mentioned. In order to ensure the interests of creditors, KPMG and its minority shareholders are also in line with the interests of small and medium-sized shareholders in seeking a rise in stock prices and opposing privatization.
Luckin has not yet re-listed, and the struggle between the former senior management team, the current senior management team, major shareholders, creditors, small and medium-sized shareholders and other parties over equity and luckin's next choice has long been fierce.
However, although this equity war is about to see the end, the highlight - returning to the NASDAQ is not an easy task.
At present, the environment for Chinese companies to go public in the United States is becoming increasingly difficult, and Luckin is still saddled with the stain of "financial fraud", and the approval procedures and investment environment will be more stringent. Moreover, the previous litigation by Chinese investors against Luckin has not yet ended, which is also a factor that cannot be ignored.
It can be expected that the better luckin operation in the future, the more fierce the equity war, the more parties involved in the war, luckin to get a better future, but also need to continue to break through.
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