Luckin Coffee has settled a class action lawsuit in the United States, putting an end to some US investors’ claims against the firm, which acknowledged to defrauding $310 million in sales in April 2020. According to a business statement on Sept. 19, settlement payments will be computed based on a global settlement of $187.5 million.
Why it matters: The bankrupt corporation, which is attempting to resurrect its business, is taking another step towards repairing its reputation following the fraud incident.
According to a Tuesday statement from the Cayman Islands-based firm, the settlement deal is still subject to court approval in the United States and the Cayman Islands.
Guo Jinyi, Luckin’s chairman and chief executive, said the settlement will resolve the company’s “substantial contingent liability,” allowing it to “move forwards with a stronger focus on operations and strategic objectives.”
Despite being impacted by the epidemic, the company’s revenue grew 33.3 percent year on year to RMB4.0 billion ($618.1 million) in 2020, according to its annual report released Tuesday. According to the corporation, price hikes were the primary driver of revenue growth.
As of 2020, Luckin operated 3,929 self-run businesses, a decrease of roughly 15% from 4,507 locations in 2019. As a result of the ongoing restructuring, the number of partnership stores at the company nearly tripled from 2019 to 874 in 2020.
Shares of the company, which were delisted in July but are still available on the OTC market, have risen nearly 40% to $15 per share so far this year on the back of business revival expectations. That’s down from its all-time high of $50 per share in January 2020, when it was first listed on the Nasdaq.