Photo shows a Luckin Coffee shop in Shanghai, east China. Photo: Xinhua

Luckin Coffee announced on Friday that it will suspend trading and be delisted on NASDAQ on Friday, adding that more than 4,000 of its domestic stores across China will continue to operate normally.

Some analysts have argued that the impact of the company's delisting will be limited to Luckin's operation in the short term, but its expansion will begin to slow, leading to it likely opening up to franchisees.

Luckin Coffee received two written notices from the Listing Qualifications Staff of the NASDAQ Stock Market, indicating the reasons for its decision to delist the company's securities from NASDAQ, Luckin announced on its website on Friday.

Luckin also notified Listing Qualifications Staff on Wednesday of its decision not to seek to reverse the Listing Qualification Staff's determination of delisting. 

The company's board has subsequently informed the Director and Chairman of the Board, Lu Zhengyao, to resign.

Wang Peng, a research assistant at the Beijing Academy of Social Sciences, echoed many analysts' claims that the company's delisting will be limited to Luckin Coffee's short-term success.

"The vast majority of Chinese consumers have limited ability to taste [good] coffee, as it is still not a mainstream drink in the Chinese market, and they cannot distinguish Luckin from Starbucks, Costa, and other coffee chains. As such, some consumers will continue to choose cheaper, domestically-produced products, such as Luckin. In the short term, the daily operations of Luckin will have no problem," Wang told the Global Times on Saturday.

Luckin announced that more than 4,000 of its stores from around the country will continue their normal operations, and 30,000 of Luckin's employees will continue to provide customers with quality products and services.

"In the medium term, Luckin's expansion rate will slow, and it may be expected that it will open the business up to franchises, in order to deal with its financial problems," Wang added.

Wang noted that Luckin could list on A-shares, Hong Kong stock, or other Asian stock markets, as the coffee chain still has the potential to succeed, because it has accumulated loyal consumers and a relatively strong reputation during its two-year operation. What's more, the company's team, which is young, efficient, and strong, all have the ability to execute innovative new market plans. 

Founded in 2017, Luckin Coffee was successfully listed on NASDAQ on May 17, 2019, with its market value peaking at $10 billion earlier in January, 2020.

However, its share price ended at $1.38 on Friday, down 54 percent, with a total market value of $348 million.

Global Times