HONG KONG -- Luckin Coffee opened its first day of trading in six weeks with a 43% nosedive on Wednesday, as investors hurried to sell off shares after a six-week freeze that ended with the Chinese Starbucks challenger saying it faced desliting by Nasdaq.
The stock, which peaked at $51.38 earlier this year before its accounting scandal, dipped to as low as $2.27 in initial premarket trading, as tracked by MarketWatch.
The coffee chain has been under intense pressure since it disclosed on April 2 its discovery that senior executives fabricated about $310 million in sales. The stock declined 83% over the following three trading sessions to $4.39 before Nasdaq halted further trading as of April 7 pending resolution of queries with the company.
Luckin on Tuesday said it had received notification from Nasdaq on May 15 that its shares would be delisted due to Nasdaq's concerns over the alleged fabricated sales and disclosure failures. The stock is to remain on Nasdaq pending the result, expected within 45 days, of an appeal by the company.
"I feel deeply disappointed and regretful that Nasdaq demanded Luckin Coffee delist before we complete our investigation into the incident," Chairman Lu Zhengyao said in a statement on his WeChat account earlier on Wednesday.
"I might have been too aggressive in business expansion, and many problems followed, but I definitely did not deceive investors with unfounded ideas and promises," he added.
Analysts say the looming delisting is likely to push many shareholders to seek an exit in an attempt to salvage some value on their holdings before the shares join so-called "penny stocks" that trade over-the-counter in New York.
"The shares will continue to face severe selling pressure," said Kenny Wen, a wealth management strategist at brokerage Everbright Sun Hung Kai in Hong Kong, earlier on Wednesday. "Finding a bottom is going to be difficult."
Also at stake are Luckin shares seized by banks including Goldman Sachs and Credit Suisse from the company's founders after they defaulted of margin loans worth about $520 million.
The Luckin scandal has reverberated on Wall Street amid a debate in Washington over restricting access by Chinese companies to U.S. capital markets and investors as tensions between the two countries climb again as they trade blame for the human toll of the coronavirus pandemic.
Nasdaq this week filed plans with regulators to raise barriers to some initial public offerings by companies from China and other countries.
Earlier this year, Luckin's shareholder ranks included high-profile institutions such as BlackRock, Capital Group, Singapore sovereign wealth fund GIC and U.S. hedge fund Lone Pine Capital as well as Centurium Capital, a Hong Kong investment group run by former Warburg Pincus Asia head David Li. The latter four institutions have since exited or trimmed their stakes.
The salvo by Nasdaq is the latest in a string of bad news for Luckin. The company sacked its chief executive and chief operating officer last week in relation to the fabricated transactions. It faces probes by regulators in the U.S. and China and lawsuits in both countries.
Luckin has continued to operate since the scandal broke, adding as many as 10 locations a day in the second quarter so far to take its network to 6,912, according to Thinknum Alternative Data, a New York-based research company. Luckin's China outlet count overtook that of Starbucks at the end of last year.
Additional reporting by Alex Fang in New York.