On the evening of Jan. 6, it was reported that middle and senior executives of Luckin Coffee signed a joint letter, accusing the current chairman and CEO Guo Jinyi of corruption, abuse of power to eradicate dissidents, and low capability to run the company. They collectively filed an appeal to the board of directors and shareholder Dazheng Capital to remove Guo from his position.
The letter was signed on Jan. 3 and seven vice presidents, general managers and core business directors of all branches all signed their names and pressed their fingerprints at the end of the letter.
Guo responded to the accusations in an internal letter to all Luckin staff on Jan. 6, stating that the letter was organized and drafted by former Luckin chairman Charles Zhengyao Lu and Luckin co-founder Jenny Qian Zhiya. He claimed that some of the employees involved were unaware of the truth and forced to sign the paperwork.
“I personally asked the board of directors to set up an investigation team as soon as possible to probe into the incident and restore the truth,” said Guo. “I have also assured the board that I won’t interfere with the investigation, and I have a clear conscience of what I’ve done since I took office.”
On Jan. 7, Luckin Coffee issued a statement on its official website, stating that “the Board immediately formed an independent committee, led by one of the joint provisional liquidators and joined by two independent non-executive directors, to conduct an investigation into the claims and circumstances of the letter.” The Board and the independent committee are said to take the matter seriously.
The company also mentioned in the statement that the allegations in the letter are unrelated to previous conducts disclosed in April, 2020. Specifically, Luckin pointed out that the letter didn’t assert that the accusation had any material impact to its reported financial data.
After the company was delisted from the Nasdaq in June 2020 and Charles Zhengyao Lu stepped down as chairman due to the financial fraud, Guo was appointed as the new CEO.
The financial scandal of Luckin Coffee was drawn to a pause as the company agreed to pay a $180 million fine in a settlement with the U.S. Securities and Exchange Commission (SEC). But the beginning of 2021 saw the internal power struggle of the coffee chain.
Only one day prior to the incident, Guo and Luckin’s partners signed a framework agreement to purchase Ethiopian coffee beans. Luckin CEO Yang Fei, whose name didn’t appear on the joint letter, also attended the meeting on Jan. 6.
On Jan. 6, Luckin Coffee closed at $8.54 per share, down 2.06%, and its market value was $2.162 billion. Compared with the highest point a year ago, its stock price has plummeted 83%, and its market value evaporated by $10.5 billion (about 67.7 billion yuan).