Luckin Coffee (LK) Stock: Is An Acquisition Ahead?

Luckin Coffee LK Stock News

Luckin Coffee Inc – ADR (NASDAQ: LK) is grabbing the attention of investors this morning, trading on gains of more than 30% and following up on yesterday’s incredible run. While this is a very high risk play considering recent news out of the comapny, there may be an acquisition around the corner. Here’s what’s going on:

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LK Stock Works To Recover

Luckin Coffee has had a rough time in the market as of late. The stock atarted to take a dive on April 2, 2020, when the company said that members of its leadership team fabricated sales transactions.

In fact, as much as $300 million in sales transactions had be fabricated and reported to investors. The company leadership, including its CEO and COO have been fired as a result of the accounting scandal and the stock has crumbled under the pressure put on it by the news.

Moreover, LK is facing delisting from the NASDAQ. In fact, the NASDAQ sent the company a notice on May 19, 2020, surrounding the potential delisting of the stock.

Nonetheless, the stock is soaring… Why?

Well, it all has to do with acquisition hopes. Recently Reuters said that given the financial struggles and dramatically reduced market cap of the company, it could make a strong takeover target.

If not a takeover, assets, like the company’s apps and consumer data could be highly valuable and worth a look by Chinese restaurant companies like Yum China Holdings and others.

Of course, this makes a lot of sense. LK stock is down well over 90%, even after the tremendous gains that we saw from the ticker both yesterday and this morning. So, it’s easy to argue that a company interested n a takeover would be gettng a good deal here.

The Bottom Line

The bottom line here is simple. Luckin Coffee is clearly a risky play. Management has been fired for fudging numbers in the books, the stock is facing delisting, and the future of the company is uncertain to say the least.

Nonetheless, for those that have a healthy appetite for risk, an investment in LK stock could be a very strong play. There’s no doubt that if there is interest in Luckin Coffee or its assets, now is the time for the buyer to act.

If an acquisition does take place, it’s likely to happen at a premium to the stock’s current price, yielding incredible returns for investors.

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