Luckin Coffee Inc. announced that it has entered into a binding term sheet to settle its US securities class action lawsuit with the lead plaintiffs. The coffeehouse chain also filed a petition and summons for directions in the Grand Court of the Cayman Islands seeking to convene a meeting with its creditors related to the mandated restructuring of its outstanding senior notes.
These recent actions are still related to the ongoing liquidation of the company after it had filed Chapter 15 bankruptcy in February 2021. The Chinese coffee company reportedly misrepresented its financials in 2019, inflating its revenue by approximately US$310 million. In December 2020, the company settled the accounting fraud case with US Securities and Exchange Commission for US$180 million without admitting or denying the allegations.
The settlement of the provisionally certified class action is connected to resolving current and future claims of holders of the company’s American depository shares holders between May 17, 2019 and July 15, 2020. The binding term sheet documents and seeks approval from the Cayman court, which oversees the liquidation, and the US court handling the US class action that the settlement amount will be based on the global settlement amount of US$187.5 million. This will be reduced on a pro-rata basis based on the valid opt-out notices that will be reported by the US court on October 8, 2021.
While the coffeehouse chain still operates its Chinese locations, the company has been delisted from the Nasdaq Stock Market since June 2020.
