Photo by Chevanon Photography on Pexels.com

Luckin Coffee (LK) has been suffered from its accounting scandal and reached its 52-week low $1.33 on May 22. However, the stock has a strong rally this week as there is rumors of asset sales. Will Luckin Coffee continuous rally or it just a bull trap? Let take a look at the fundamental and risk of the company.

Fundamental

After the accounting scandal, the company has changed its management team to improve cooperate governance. As searched in China ‘s social media “Dianping.com”, Luckin Coffee still under operation and people still enjoying its product. However, according to the Third Quarter 2019 Financial Results, Luckin Coffee is still not profitable and its cash flow is mainly support by financing activity.

Customer’s review at Dianping.com
Customer’s review at Dianping.com

Risks

Luckin Coffee is facing two uncertainty. Firstly, potential legal claims from investor for accounting fraud which is still an unknown amount. Secondly, Luckin Coffee has received delisting notice from Nasdaq. As stated in Luckin Coffee’s press release on May 19, the company plans to request hearing but there is no assurance that the panel will grant the company’s request for continued listing.

Overall

Base on its potential legal claims and delisting risk in long run, the potential asset sales may be just a short term catalyst to creating a bull trap. Overall, Luckin Coffee may be too risky for investor to own.

Reference:

https://www.fool.com/investing/2020/05/27/why-luckin-coffee-stock-surged-216-today.aspx

https://www.fool.com/investing/2020/05/12/luckin-coffee-fires-2-top-executives-including-ceo.aspx

http://www.dianping.com/

http://investor.luckincoffee.com/news-releases/news-release-details/luckin-coffee-receives-delisting-notice-nasdaq-and-plans-request

http://investor.luckincoffee.com/static-files/e228e5f9-e47f-47e4-b8dd-f1cabe870ebb

Investment Disclaimers


Advertisements
Advertisements
One-Time
Monthly
Yearly

Make a one-time donation

Make a monthly donation

Make a yearly donation

Choose an amount

$5.00
$15.00
$100.00
$5.00
$15.00
$100.00
$5.00
$15.00
$100.00

Or enter a custom amount

$
——

Your contribution is appreciated.

Your contribution is appreciated.

Your contribution is appreciated.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s