Is Luckin Coffee in the Middle of a Dead Cat Bounce?
Luckin Coffee Inc. (NASDAQ: LK) shares jumped again on Wednesday, after posting an incredible gain of 50% on Tuesday. Is there anything behind this move, or is this just a dead cat bounce?
Only recently has the Chinese coffee chain resumed trading on the Nasdaq, after being halted on April 7, and Luckin Coffee stock plummeted as a result. However, there are larger concerns with the prospect of delisting from the Nasdaq.
The Nasdaq indicated that its Listing Qualifications Staff is determined to delist the company’s securities from the exchange. Two bases were cited for the determination. First Nasdaq cited public interest concerns as raised by the fabricated transactions disclosed by the company on April 2. Also, the company’s past failure to disclose material information publicly, citing a business model through which the previously disclosed fabricated transactions were executed.
The Chinese company is appealing this decision and plans to request a hearing before the Nasdaq Hearings Panel. Luckin stock will remain listed on the Nasdaq, pending the outcome of the panel’s decision.
The stock originally took a hit when it was reported that the company had fabricated sales. Chief Executive Officer Jenny Zhiya Qian and Chief Operating Officer Jian Liu were fired after the company conducted an internal investigation.
Now that shares are down about 95% year to date, it appears that some investors are bottom-fishing this stock. Despite the rampant fraud and potential delisting on the table, some investors still see some value in this stock.
Luckin Coffee stock traded up about 16% at $2.46 Wednesday morning, in a 52-week range of $1.33 to $51.38. The consensus price target is $37.73.