Beijing-based Luckin Coffee (OTC: LKNCY), which is currently in provisional liquidation, announced Tuesday that it has entered into a binding term sheet with the plaintiffs to settle the U.S. Securities Class Action litigation.
The term sheet will fully resolve claims that have been or could be filed on behalf of a class of purchasers of the company’s American Depositary Shares between May 17, 2019, through July 15, 2020.
The Chinese coffee chain said the settlement amount will be calculated based on a Global Settlement Amount of $187.5 million, which will be reduced on a pro-rata basis.
Dr Jinyi Guo, Chairman and Chief Executive Officer of Luckin Coffee, commented: “Upon final approval, this settlement will resolve a significant contingent liability and enable Luckin Coffee to move forward with a greater focus on our operations and the execution of our strategic plan.
“We are working diligently to enter into formal settlement agreements and obtain the necessary court approvals.”
On Tuesday, the company also announced it has filed a petition and summons for directions in the Grand Court of the Cayman Islands concerning a scheme of arrangement linked to restructuring its $460 million 0.75% convertible senior notes due in 2025.
The company was part of an accounting scandal last year after it was found that past management invented over $300 million in sales. As a result, it was delisted from Nasdaq.
The stock now trades on the Over The Counter (OTC) market. Its shares are up over 17% at $17.15 premarket, erasing Monday's 8.7% loss.
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