Luckin Coffee Reaches Preliminary Agreement Worth $175 million for Class Action Settlement

According to Reuters, Luckin Coffee Inc. reached a $175 million settlement in its shareholder class-action lawsuit on Wednesday.

The shareholders’ lawyers described the all-cash settlement, which was filed late Monday night, as a “excellent result,” citing Luckin’s liquidation proceeding in the Cayman Islands and related filing for bankruptcy protection under the United States Bankruptcy Code. Additionally, the agreement covers Luckin’s executives, underwriters of the company’s $645 million initial public offering in 2019 and those involved in a subsequent offering of the company’s American depositary shares.

On Tuesday, US District Judge John Cronan in Manhattan approved the preliminary settlement agreement and scheduled a hearing for final approval on January 31, 2022. Additionally, the settlement must be approved by a Cayman Islands court.

In April 2020, Luckin was accused of financial fraud, causing the company to almost immediately lose its status as the “fastest IPO in 18 months.” The company’s stock price then plummeted, prompting an investigation by US regulators. Soon afterwards, the company’s stock was delisted from US stock exchanges, and its founding team was relieved of their positions. Luckin has refinanced, maintained business stability, and completed a series of optimizations and upgrades over the last year under the leadership of the new CEO.

On October 22, Luckin Coffee released its unaudited financial report for the first half of 2021, revealing a nett income of 3.183 billion yuan ($49.78 million), up 106 percent from 1.545 billion yuan in the same period of 2020. As the data indicates, both revenues and losses have improved significantly year over year. Among them, in the first half of 2021, the store-side business turned a profit.

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