(Bloomberg) -- Lenders led by Credit Suisse Group AG have targeted the family assets of Luckin Coffee Inc. Chairman Lu Zhengyao as they try to recoup losses on more than $500 million in soured margin loans.Credit Suisse is seeking a court order to appoint liquidators for Haode Investment Inc., according to a notice in the BVI Gazette on Thursday. Haode, controlled by Lu’s family trust, defaulted on loans backed by Luckin shares in April, according to a statement from lenders last month. Spokespeople for Credit Suisse and Luckin declined to comment.The liquidation request adds to a long list of challenges facing Lu, who became a billionaire after his fast-growing Chinese coffee chain went public in the U.S. with help from some of the biggest names on Wall Street. Much of Lu’s wealth has been wiped out by a 92% plunge in Luckin’s stock since April, when the company disclosed that some of its employees may have fabricated billions of yuan in sales.Luckin’s fall from grace has made it a poster child for concerns about Chinese corporate governance, fueling a debate in Washington over the extent to which U.S. money and capital markets should be made accessible to firms from a growing geopolitical rival. Nasdaq Inc. plans to delist Luckin’s stock, while the U.S. Senate approved legislation Wednesday that could lead to some Chinese companies being barred from American exchanges.Lu said in a statement on Wednesday that he’s “deeply disappointed” Nasdaq is moving to delist Luckin before the company releases final results of an internal probe into its accounting. Regulators in the U.S. and China are also investigating the coffee chain, while Luckin bondholders have secured a freeze on $160.7 million in assets, according to a May 11 filing in Hong Kong.Banks that participated in the loan facility to Lu’s investment vehicle signaled in April that they plan to sell Luckin shares that were pledged as collateral. It’s unclear whether the banks have started offloading the shares or how much money they’ll be able to recoup.Credit Suisse and Morgan Stanley each put up about $100 million as part of the loan facility, while China’s Haitong International Securities Group lent about $140 million, Bloomberg reported last month, citing a person familiar with the matter. Other banks involved include Barclays Plc, Goldman Sachs Group Inc. and China International Capital Corp.Lu’s investment vehicle has disputed that it’s in default and has requested an injunction against Credit Suisse in Hong Kong to prevent the bank from commencing liquidation proceedings, according to a May 6 court filing.Few banks have seen a bigger fallout from the Luckin saga than Credit Suisse, which was the lead underwriter for Luckin’s initial public offering, a secondary share sale in January and a $460 million issuance of convertible bonds.The bank lost a high-profile Hong Kong IPO in the wake of the scandal and reported a five-fold increase in loan-loss provisions at its Asia Pacific unit, primarily due to the Luckin margin loans. The bank is conducting a review of the case, and scrutiny on loans to Chinese companies has increased, according to people familiar with the matter who declined to be named discussing private matters. China is core to Credit Suisse’s strategy to win business from rich entrepreneurs across Asia.The Swiss bank, which is acting as an agent for the loan facility, filed the liquidation request to the Eastern Caribbean Supreme Court, High Court of Justice, in the British Virgin Islands on April 23, according to the BVI Gazette notice. A hearing is schedule for June 8.(Adds Luckin and bondholders lawsuits.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The ripples are already being felt in the markets after landmark legislation was approved by the Senate.
Shares of Luckin Coffee (NASDAQ: LK) jumped more than 20% on Wednesday, continuing the stock's rally off its recent lows. After being hit with an accounting scandal, executive terminations, and a Nasdaq delisting notice, Luckin Coffee's stock went on to suffer devasting losses of more than 95% from its all-time highs reached back in January. Reuters reported on May 24 that restaurant giant Yum China and Tencent-baked Tim Hortons could be exploring the possibility of purchasing some of Luckin Coffee's assets, including its popular mobile app and extensive customer data.
Investors need to pay close attention to Luckin Coffee (LK) stock based on the movements in the options market lately.
Luckin Coffee and three other Chinese stocks could be in the blast zone of newly proposed regulations.
The banks that lent $518 million to Luckin Coffee
Senate legislation builds in a three-year grace period, meaning New York will remain home to Chinese companies’ listings for some time.
It might seem as if things couldn't get worse for Luckin Coffee (NASDAQ: LK). In early May, after its chief operating officer and other associated employees resigned amid allegations of fabricating meaningful amounts of Luckin's sales, Luckin's stock plunged and was subsequently halted for several weeks. During the trading halt, Luckin's CEO was later fired as well, as apparently a deeper malfeasance was discovered at the company in the meantime.
The stock market moved higher on Tuesday, reflecting rising optimism among investors about the prospects for a return to more normal business conditions in the coming weeks and months. Public health officials fear that relaxed mitigation efforts could bring back a resurgence of COVID-19 outbreaks, but progress on several fronts toward a possible vaccine also made market participants more comfortable. The Dow Jones Industrial Average (DJINDICES: ^DJI) led the way with a greater than 2% gain, with smaller rises for the S&P 500 index (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC).
(Bloomberg) -- Netease Inc. aims to list shares in Hong Kong on June 11 and JD.com Inc. a week after, a person familiar with the matter said, completing two mega stock sales for the city at a time of escalating market volatility.U.S.-listed Netease and No. 2 Chinese online retailer JD hope to gain approval for local debuts during listing-committee hearings on Thursday, the people said, asking not to be identified discussing private matters. JD’s stock sale could raise $2 billion or more to help the e-commerce giant shore up its position in an increasingly competitive home market. The retailer’s June 18 target coincides with its largest annual online sales event.The twin debuts follow Alibaba Group Holding Ltd.’s $13 billion Hong Kong stock sale last year, hailed as a homecoming for Chinese companies and a win for Hong Kong Exchanges & Clearing Ltd., which lost many of the largest tech corporations to U.S. bourses because it didn’t allow dual-class share voting at the time -- a requirement that’s since been relaxed. Netease and JD are also listing at a time of escalating tensions between Washington and Beijing, now spilling over into Chinese companies’ access to U.S. capital markets after the downfall of Luckin Coffee Inc. -- one of the country’s brightest startups.Representatives for JD, Netease and Hong Kong’s exchange declined to comment.Read more: JD Is Said to File for $2 Billion Hong Kong Second Listing Shares in U.S.-listed Chinese companies have see-sawed since senators overwhelmingly approved legislation Wednesday that could bar the country’s firms from American exchanges. The decision cast a pall of uncertainty over hundreds of billions of dollars of shares in some of the world’s best-known companies. China this week also moved towards national security legislation for Hong Kong, sowing panic in the city’s $5 trillion stock market.Read more: Hong Kong Stocks Crash On New Concern Over City’s FutureEven if the delisting bill is eventually approved, the impact on China’s largest tech corporations remains unclear. American lawmakers have long raised red flags over the billions of dollars flowing into the Asian country’s biggest firms, much of it from pension funds and college endowments in search of fat investment returns. Alarm has grown in particular that American money is bankrolling efforts by the country’s technology giants to develop leading positions in everything from artificial intelligence and autonomous driving to internet data collection.Baidu Inc. founder Robin Li told the state-backed China Daily the company was concerned about heightened scrutiny of Chinese companies and was constantly exploring options including a secondary listing in Hong Kong or elsewhere.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Shares of Luckin Coffee (NASDAQ: LK) plummeted on Friday as myriad negative factors continued to weigh on the beleaguered Chinese coffeehouse chain. As of 1:36 p.m. EDT, Luckin's stock was down more than 30%. Luckin Coffee's stock crashed in April after the company disclosed that it was investigating its chief operating officer for allegedly inflating sales by hundreds of millions of dollars.
(Bloomberg Opinion) -- China’s decision to impose a national security law on Hong Kong has spurred speculation of capital flight and an erosion of the city’s status as an international financial center. As a venue for share offerings, at least, the near-term future is looking bright. For that, the territory can thank worsening U.S.-China relations.U.S.-listed Chinese technology companies are lining up to sell stock in Hong Kong, seeking refuge from an environment that has become increasingly less hospitable. Nasdaq-traded JD.com Inc. and NetEase Inc. are planning secondary listings in the city next month, following a trail blazed by Alibaba Group Holding Ltd. in November. Optimism that more companies will join them drove shares of Hong Kong’s exchange operator up more than 6% on Monday.There’s every reason to expect these stock offerings to do well, and push Hong Kong back up the rankings of the world’s largest fundraising centers. So far this year, the city is the sixth-largest market by capital raised. It topped the table for the whole of 2019 when New York-listed Alibaba sold $13 billion of stock, underscoring the existence of a strong local investor base for China’s most successful companies.The reception for Alibaba suggests that Asian institutional investors want to be able to trade China’s leading enterprises in their own time zone. JD and NetEase are also among the nation’s technology champions. Beijing-based JD competes with Alibaba in e-commerce, while Hangzhou-based NetEase is behind some of the most popular mobile games in China. Beyond these two, search-engine operator Baidu Inc. is considering delisting from Nasdaq and moving to an exchange nearer home, Reuters reported last week. The coronavirus has exacerbated tensions between Washington and Beijing, while scandals such as fabricated sales at Luckin Coffee Inc. have spurred politicians to push for tighter regulation, giving Chinese companies an incentive to list elsewhere.Hong Kong is an obvious choice. The city burnished its appeal for U.S.-traded companies last week when the compiler of the city’s benchmark Hang Seng Index said it would change its rules to admit secondary listings and companies with dual-class share structures. Stocks that join the benchmark can expect inflows from passive investors such as exchange-traded funds that track the index.Citigroup Inc. reckons that 23 of the 249 Chinese stocks traded in the U.S. meet Hong Kong’s criteria for a secondary listing, which require companies to have a market value of $5.2 billion or, alternatively, a combination of $129 million in annual sales and a $1.3 billion market cap. JD tops the group with a value of $73 billion.An even more alluring prize would be inclusion of secondary listings in Hong Kong’s stock-trading links with the Shanghai and Shenzhen exchanges, which would enable mainland Chinese investors to buy these shares. Alibaba wasn’t included in the stock connect, to the disappointment of some investors. China’s government could yet decide to make this happen.It’s a reminder that Beijing has levers at its disposal to help shore up Hong Kong’s economy and financial industry, which accounts for a fifth of the city’s gross domestic product — as it did after the SARS epidemic in 2003, when half a million people demonstrated against the Hong Kong government’s first, aborted attempt to introduce national security legislation. Hong Kong Exchanges & Clearing Ltd. surged the most in 18 months Monday even as unrest returned to the city. Listing of American depositary receipts may double the exchange operator’s revenue, Morgan Stanley said. The Hang Seng Index, meanwhile, stabilized after slumping 5.6% on Friday.An exodus of businesses, people and capital may yet imperil Hong Kong’s role as an international financial center. The IPO outlook suggests that, rather than a sudden demise, that’s likely to be a long drawn-out process. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Rumors of asset sales could be spiking investors' interest in the beleaguered Chinese coffee-shop chain.
In this episode of Industry Focus: Wildcard, Emily Flippen and Motley Fool analyst Bill Mann talk about financial fraud in the international space. They look at the example of Luckin Coffee (NASDAQ: LK), giving insight into the challenges of researching foreign companies, some hints on spotting discrepancies, and a look at whether you should worry about investing in foreign companies.
Ahead of earnings, should you buy Alibaba (NYSE:BABA)? The novel coronavirus took some wind out of the company, but China's in recovery mode. Growth remains in motion for the company's e-commerce and cloud computing businesses. In short, there's good reason why investors have bid Alibaba stock higher in recent weeks.Source: Kevin Chen Photography / Shutterstock.com Granted, shares haven't retraced prior highs set in January. Yet, with shares still below the high-water mark, now may be the time to buy. As China puts coronavirus in the rear-view mirror, shares could continue to bounce back.Recent backlash over U.S.-listed Chinese stocks may give you pause. The risks of the U.S.-China trade war resuming is another key risk. But, with these factors priced into shares, don't let this keep you away from this opportunity.InvestorPlace - Stock Market News, Stock Advice & Trading TipsLet's dive in, and see why Alibaba stock could be a strong buy before earnings. E-Commerce, Cloud Growth and Alibaba StockAs our own Matt McCall recently wrote, "investors are flowing into what's working." In other words, shares in hard-hit airline and retail stocks remain far below prior highs. But, coronavirus hasn't really affected big tech stocks. As a result, these names have recovered faster than the overall market. * 7 Excellent Penny Stocks Ready to Roar But that's not the only thing working in this company's favor. Consider the fact that China is largely over the pandemic.As D.A. Davidson's Gil Luria recently put it, "China is the only big country that is really past the peak of the pandemic." While the Western world struggles to "return to normal," China's in full recovery mode.This bodes well for Alibaba's continued growth in their e-commerce and cloud computing businesses. In short, shares could continue moving back to prior highs (around $230 per share). And beyond.Over the next fiscal year (ending March), analyst consensus calls for sales to grow from $71.2 billion to $92.5 billion. In other words, nearly 30% revenue growth.Earnings could climb 20% in the next year, from $7.01 per share, to $8.45 per share. Yes, earnings growth may be slower than revenue growth. But, like it's American counterpart, Amazon (NASDAQ:AMZN), you aren't buying Alibaba for its current earnings.Instead, you are buying for the company's ability to scale into a much larger business down the road. Once growth takes a breather, the company can "cash the check." That is to say, increase margins, resulting in a highly profitable business.Yet, despite these strong points, there are some concerns to keep in mind. While largely priced into shares, they are still caveats to consider. Geopolitical Risks Holding Back ValuationAs InvestorPlace's Mark Hake discussed May 19, Amazon stock has moved much higher year-to-date compared to Alibaba. Why is that the case? There are two key reasons why investors have been afraid to bid up this stock in the same way they've done with its American counterpart.Firstly, there are valid concerns over a reinvigorated U.S.-China trade war. As you may remember from last year, the trade war was bad news for this stock. Shares largely tread water for most of 2019, only moving higher once the battle cooled down in December 2019.Secondly, the recent backlash over US-listed Chinese stocks. After the Luckin Coffee (NASDAQ:LK) fiasco, there's great concern over the reliability of Chinese financial statements. As a result, some are calling for stricter regulations.Proposed legislation moving through the U.S. Congress could mean a delisting of Chinese companies from U.S.-based stock exchanges. Even if names like Alibaba aren't forced out, the hassle of complying with new laws may compel them to de-list voluntarily.The specter of increased U.S. regulation could explain the company's 2019 Hong Kong IPO. With this new listing, the company has less of a need to continue trading in the U.S.In short, it makes perfect sense why shares remain "cheap" relative to Amazon. Alibaba stock trades for a forward price-to-earnings (P/E) ratio of 31. Amazon shares sport a forward P/E of 121.4.Yet, this valuation discrepancy may be an opportunity, not a red flag. Geopolitical risks could be priced into shares. In other words, today's valuation may be a strong entry point. Despite Risks, Consider Alibaba Stock a BuyWeakening US-China relations may be holding this stock back. But, don't let these concerns scare you away. With China in recovery mode, the company's growth prospects in e-commerce and cloud computing remain in motion.Earnings hit the street pre-market on May 22. If the company meets expectations, shares could climb further. Tread carefully due to the geopolitical risks. But consider Alibaba stock a buy at today's prices.Thomas Niel, contributor to InvestorPlace, has written single-stock analysis since 2016. As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities. More From InvestorPlace * Top Stock Picker Reveals His Next 1,000% Winner * America's Richest ZIP Code Holds Shocking Secret * 1 Under-the-Radar 5G Stock to Buy Now * The 1 Stock All Retirees Must Own The post Tread Carefully, but Continued Growth Makes Alibaba Stock a Buy appeared first on InvestorPlace.
Shares of Luckin Coffee (NASDAQ: LK) were tumbling again today as the stock continues to slide after the Nasdaq said on Tuesday it plans to delist it from the exchange. Today, the Senate passed a bill that could delist Chinese stocks from American exchanges, which comes in part as a response to fraud revelations at Luckin, which caused American investors to lose billions. On Tuesday, Luckin said it had received a letter from Nasdaq with plans to delist the stock due to its fraudulently inflating its sales.
A syndicate of lenders aims to liquidate Charles Zhengyao Lu's privately-held company following a loan default.
Momentum is building for the House of Representatives to approve sweeping legislation that could ultimately bar many Chinese companies from listing shares on U.S. exchanges. The Senate already has approved the bill.
What’s bad news for investors in U.S.-listed China-based stocks is good news for short sellers, who made back almost everything lost this year after the Senate approved the Holding Foreign Companies Accountable Act.
I finally got out of a notorious Chinese stock, but I was a net buyer for the week after buying into three other stocks.