China News Client, Beijing, June 30 (Xie Yiguan) The "Little Blue Cup" ran all the way, and coffee was scattered all over the place!
Ruixing Coffee is swallowing the bitter fruit of its own fraud, and it was delisted in just 13 months of listing! On June 29th, US time, Ruixing Coffee's stock was officially suspended from NASDAQ for delisting.
Ruixing Coffee's stock was officially suspended on the 29th. The picture shows the stock chart of Ruixing Coffee.
From birth to listing, NASDAQ has the fastest record
Ruixing Coffee, established more than two years ago, was once called a phenomenal unicorn company.
Many people did not expect that from the establishment to the listing and delisting, Ruixing Coffee has integrated other companies' decades of history into more than two years.
On October 31, 2017, Ruixing Coffee was officially established. In January 2018, the Ruixing Coffee experimental store opened in Beijing, and a "Little Blue Cup" printed with a white deer broke into people's vision.
On May 17, 2019, only 18 months of Ruixing Coffee was born. With 2370 stores, 16.8 million customers, sales of more than 100 million cups, and a "achievement" listing of about 2.2 billion losses, it refreshed Nasda. The fastest record in history from birth to listing.
After the listing, Ruixing Coffee has developed rapidly. As of the end of 2019, the number of directly operated stores reached 4,507, successfully surpassing Starbucks, which has been working in the Chinese market for 20 years.
As an internal incubation project of UCAR, Ruixing Coffee announced its independence on November 8, 2017, and officially entered the venue with capital. Lu Zhengyao, CEO of China UCAR, led an angel round of financing of about 1 billion yuan. As the founder and CEO of China UCAR COO Qian Zhiya, he became the head of Ruixing Coffee.
The "Golden Spoon" of Ruixing Coffee has brought its Internet genes from the moment of its birth, using money-burning subsidies and other Internet customary tactics to fight high, attack the city, and star against giants such as Starbucks.
At that time, advertisements for famous movie stars Zhang Zhen and Tang Wei holding "Little Blue Cup" were posted in the elevator. "Get a cup for the first time you log in to the APP to register" and "Invite friends to become a new user and get a free cup", Ruixing Coffee keeps "losing money to make money" through discounts. The coupons presented every day let netizens say bluntly, "I drink not coffee, but coupons."
On April 3, at the Ruixing Coffee Shop in Shanghai Dahua Tiger City Carnival, citizens waited for the coffee they had purchased. The picture shows the scene in the store. Photo by Yin Liqin
Self-exposed fraud, giving up struggling to delist
Ruixing Coffee, who was born in the "China Department", is well versed in the rules of the capital game, and the operation is as fierce as a tiger, becoming the "quality stock" in the eyes of investors.
At the end of 2019, the US media InvestorPlace named Ruixing Coffee stocks as "Best stocks in 2020". On January 17, 2020, Ruixing Coffee's stock price reached its peak, hitting a maximum of $51.38 during the session, with a market value of about $12.9 billion.
At that time, many investors were still expecting that this unicorn company, which was listed on the Nasdaq just one and a half years ago, will be more brilliant in 2020, but a short report pushed Ruixing Coffee to the cusp of the storm.
On January 31, the well-known short-selling agency Muddy Water claimed to have received an anonymous report on Ruixing Coffee. The report believes that Ruixing Coffee has fabricated financial and operational data since the third quarter of 2019.
At that time, Ruixing Coffee said that the investigation method of the short report was flawed, and the evidence was not confirmed, and there were malicious and false elements.
But unexpectedly, two months later, Ruixing Coffee suddenly "exploded". On April 2, its announcement stated that Chief Operating Officer Liu Jian and some employees forged performance of 2.2 billion yuan. On the same day, Ruixing Coffee plunged 80.95% at the opening to $4.99, a record low, and its market value evaporated by nearly $5 billion.
Immediately after Ruixing Coffee began to avoid danger and survive. On the evening of May 12, Ruixing Coffee announced the termination of the positions of CEO Qian Zhiya and Chief Operating Officer Liu Jian, and appointed Guo Jinyi as acting CEO. Six other employees who participated in or knowingly fabricated transactions were suspended or resigned.
But under the guise of financial fraud, on May 15, Ruixing Coffee still received a NASDAQ delisting notice. In order to avoid delisting, according to exchange rules, Ruixing Coffee said at the time that it planned to apply for a hearing.
On June 17, Ruixing Coffee received NASDAQ's delisting notice again because it had not submitted its annual report. Ruixing Coffee, who had received the delisting notice for 33 days, gave up struggling and decided to cancel the hearing application on June 24, accepting the fate of delisting.
Since the 29th, Ruixing Coffee was suspended from opening. As of June 26th, US time, the stock price of Ruixing Coffee was finally fixed at $1.38, with a market value of $347 million. Compared with the peak period of $51.38 per share, Ruixing Coffee before the delisting had only a fraction of the time.
Data Map: A pedestrian passes by Ruixing Coffee in front of the Beijing Baoneng Building store. China News Service reporter Hou Yushe
Delisting does not mean everything is settled
Ruixing Coffee, which accepts the fate of delisting, is facing greater personnel upheaval.
On June 20, Ruixing Coffee issued a notice to hold an extraordinary general meeting on July 5. Discussions included the dismissal of director appointments of independent directors Sean Shao, Li Hui and Liu Erhai, as well as the appointment of chairman Lu Zhengyao. On June 27, Ruixing Coffee announced that the board of directors decided to require Lu Zhengyao to resign as director and chairman, and a meeting of the board of directors will be held on July 2 to consider the proposal to dismiss Lu Zhengyao as director and chairman.
In addition, Ruixing Coffee and the Lu Zhengyao family also face litigation claims from domestic and foreign investors.
After Muddy Water released the report, a number of law firms in the United States have filed a class action lawsuit against Ruixing Coffee, accusing Ruixing Coffee of making false and misleading statements that violated US securities laws. The class action suit was filed in the Southern District Court of New York on February 13. According to Bloomberg News, Ruixing Coffee's class action in the United States has designated the chief plaintiff and law firm.
Song Yixin, a lawyer at Shanghai Hanlian Law Firm, once said that he roughly estimates that once faced with a class action, Ruixing Coffee will face a total compensation of about 11.2 billion US dollars, equivalent to 75.4 billion yuan.
According to media reports, on April 22, domestic investors sued Ruixing Coffee to the Xiamen Intermediate Court. On May 15, foreign investors sued Ruixing Coffee in court in Hong Kong, China. The verdict has not been made public. However, the Hong Kong court ordered the freezing of Ruixing Coffee’s assets, restricting Ruixing Coffee’s sale or transfer of assets between entities registered in the Cayman Islands and Hong Kong.
In addition, according to documents from the British Virgin Islands courts, Credit Suisse led suing Summer Fame Limited (controlled by the Qian Zhiya family) and Haode Investments Inc (controlled by the Lu Zhengyao family) will be sentenced on July 6.
Some analysts said that if the liquidation proposed by Credit Suisse and others were supported by the court, Lu Zhengyao would lose the super-voting power and also lose the actual control over Ruixing. This is why Lu Zhengyao scheduled the extraordinary shareholders meeting on July 5.
In addition to facing civil litigation, Lu Zhengyao and others may also face public prosecution. According to Caixin reports, China's General Administration of Market Supervision and the Ministry of Finance have successively investigated Ruixing Coffee and obtained evidence related to counterfeiting. It is expected that Lu Zhengyao will be prosecuted and will most likely face criminal prosecution.
Will the "Little Blue Cup" more than 4,000 stores close?
Now, what most consumers are most concerned about is whether they can still drink "small blue cup" coffee after Ruixing Coffee delists.
On the 27th, Ruixing Coffee issued a statement stressing that in the domestic consumer market, Ruixing Coffee will operate more than 4,000 stores nationwide, and nearly 30,000 employees will continue to provide users with high-quality products and services.
Screenshot of Ruixing Coffee's Weibo statement.
A reporter from Chinanews asked the customer service of Ruixing Coffee on the 29th. It said that the store is currently operating normally, customers can place orders in stores and applets, and coupons can also be used as usual. As you can see on the APP, the variety of products in the store is still complete, and only a few are sold out.
"But with reference to the case of the American Enron scandal in 2001, there are nine out of ten cases that will lead to bankruptcy." Liu An, a postdoctoral fellow in theoretical economics, said.
Ruixing Coffee, on the verge of life and death, has significantly slowed down in 2020. According to the data of Tianyancha, there are two new companies in the country whose name includes "Ruixing Coffee" in 2017, about 1,800 in 2018, and more than 2,000 in 2019; as of June 28, only new from 2020 to now An increase of 186, a decrease of 80.6% over the same period last year. At the same time, 99 related companies have cancelled or revoked.
"Ruixing Coffee is expected to be able to operate normally in the short term, because investor claims and administrative penalties have not yet been finalized, and it has not yet reached the implementation stage." Kuang Yuqing, the founder of Lens Research, told reporters from China News. The loss is heavy, and once it reaches the implementation stage, it is estimated that all assets have been liquidated and it is not enough to compensate.
According to Kuang Yuqing, the most realistic thing for Ruixing Coffee to survive is to reach a settlement with the investor who claims to compensate investors for losses with stocks and avoid going to the bankruptcy liquidation stage.
Is it possible to be acquired? Kuang Yuqing believes that the possibility of being acquired as a whole is unlikely. No one wants to take over a debt that is enough to make the company bankrupt and liquidate, and its reputation is bad. (Finish)