China probes alleged fraud at LuckinCoffee, banks review IPO work
At least two of the four banks which led Luckin's IPO in May last year have begun reviewing their work for the float, according to four sources with knowledge of the scrutiny.
The four banks also worked on a follow-on share sale and a convertible bond worth a total of US$980 million in January.Luckin's shares tumbled to US$6.40 by the end of Thursday trading from US$26.20 at Wednesday's close, wiping out about US$5 billion in market capitalisation.Bankers and investors warned on Friday that Luckin's issues were likely to weigh on other Chinese companies considering a US IPO - a group already affected by the trade tensions of 2019.
"It will affect potential US IPOs from China. China's economy is not doing well already and with Luckin's scandal these companies will face much tighter scrutiny for going public," said a banker who specialises in tech firms' fundraisings, including IPOs.
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