What happened to Luckin Coffee’s suspension of trading? What impact will Luckin Coffee’s suspension of trading have?

Since announcing on April 2 that it had falsified its earnings by 2.2 billion yuan, the U.S.-listed Luckin Coffee's stock price has plummeted, falling 80% on the day and has continued to fall sharply in recent days, falling 14% last night. Now the official announcement has been made to suspend trading, pending disclosure of more information.

Luckin Coffee’s RMB 2.2 billion financial fraud has affected the insurance sector. Currently, several law firms in the United States have filed lawsuits against Luckin Coffee and specific managers, and Luckin Coffee has filed claims for directors' and officers' liability insurance with relevant insurance companies. According to information, Luckin Coffee took out directors' and officers' liability insurance before its listing in the United States, with a total insured amount of US$25 million. Several domestic insurance companies participated in the underwriting in the form of a co-insurance group.

It is reported that Luckin Coffee’s directors’ liability insurance policy consists of four layers of “co-insurance” with a total insured amount of US$25 million. The "bottom-level co-insurance group" is composed of eight Chinese companies with a coverage of US$10 million. Ping An Property & Casualty Insurance Co., Ltd. of China is the chief underwriter of the "bottom layer", with a bottom layer underwriting share of 30%.

On April 7, Luckin Coffee announced a pre-market halt in its U.S. stock trading, pending more information disclosure. Luckin Coffee rose 4.56% pre-market, while over the past three trading days Luckin Coffee has fallen approximately 83%. The current share price is $4.39 per share, with a total market value of approximately $1.105 billion.

It is worth noting that Luckin Coffee had purchased directors’ and officers’ liability insurance before its listing in the United States, and several domestic insurance companies participated in the underwriting in the form of a co-insurance group. Luckin Coffee’s directors’ liability insurance policies consist of four layers of “co-insurance” with a total insured amount of US$25 million. The "bottom-level co-insurance group" is composed of 8 Chinese companies with a coverage of US$10 million. It is reported that Luckin Coffee has initiated claims application.

In addition, Goldman Sachs released a report saying that Haode Investment, controlled by Luckin Coffee shareholder Lu Zhengyao, defaulted on its loans, and the lender is entrusting Credit Suisse Singapore Branch to take enforcement measures. The loan size is US$518 million, which may involve 76.4 million Luckin Coffee American Depositary Shares (ADS), including additional pledged shares by entities controlled by the family trust of Luckin Coffee CEO Qian Zhiya.

The latest news said that the law firm Thornton Law Firm LLP has stated that investors who purchased Luckin Coffee shares or other securities between April 1, 2016 and April 2, 2020, if interested, can visit the law firm's website for more information or contact them directly. A lawsuit has been filed against the company on behalf of Luckin Coffee shareholders.