Luckin coffee (NASDAQ: LK) seems to get into hotter water. On Monday, it was reported that the company’s chairman and his CEO are forced to hand over a package of shares after paying off a loan.
Haode Investment, a company controlled by President Charles Zhengyao Lu, paid a $ 518 million margin loan to a bank’s syndicate, according to a press release issued by one of its syndicate members, the US Investment Bank Goldman Sachs (NYSE: GS).
Nearly 611 million shares in the Luckin Coffee share have been pledged as collateral in the loan, Goldman wrote, which includes shares pledged by the family trust of the company̵
Goldman added: “Lenders have begun the process of enforcing the collateral to meet the borrower’s obligations under the facility, including the conversion of Series B ordinary shares into [Luckin Coffee] to US custody shares … in the company. “
The bank pointed out that if all the pledged shares were received and sold by the syndicate, Qian’s voting rights in Luckin Coffee would “decrease significantly” while Lu would not.
The news comes on the heels of Luckin Coffee’s sales scandal, where its revenue from the second to fourth quarters of 2019 is apparently inflated. The abuse was initially alleged by Chinese-focused investment firm Muddy Waters Research in January. At that time, Luckin Coffee denied the charges. Last week, however, it said it formed a board committee to investigate the matter.
Luckin Coffee has not yet commented on Lu’s loan decline, or the fate of the shares he and Qian promised.
It is not surprising that the shares in Luckin Coffee fell on Monday and fell by over 18% against healthy gains in the broader stock.