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China's Luckin Coffee Just Filed for Bankruptcy Protection

Madeleine Johnson
·1 min read

Shares of Chinese coffee company Luckin Coffee LKNCY are plunging on Friday after announcing that it filed for Chapter 15 bankruptcy in the U.S. LKNCY trades on OTC markets, and fell nearly 50% in afternoon trading.

This move is designed to protect Luckin from legal action from U.S. creditors including shareholders and bondholders owed $460 million. Luckin said its retail stores will still remain open for business; its coffee continues to be popular in China.

The company was once seen as a major Starbucks SBUX competitor in China, but that dream quickly faded--Luckin announced last year that a significant period of revenue, expenses, and net operating loss, around $300 million, may have been faked. Chairman Charles Lu was quickly removed from his position, and shares have since been delisted from the Nasdaq.

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