China’s US-listed RuiXing Coffee, which was shorted by a US investment firm last year after news of financial fraud, is rumored to have filed for bankruptcy protection in the US to restructure the company’s debt.
In the years before the financial scandal last year, RuiXing Coffee had been expanding in China, once challenging the position of U.S. coffee brand Starbucks in China, and its stock price in the United States was climbing.
But in February last year, U.S. stock market shorting agency Muddy Waters issued a warning that RuiXing Coffee had committed serious financial fraud in 2019, falsifying hundreds of millions of dollars in sales. RuiXing executives also admitted to the allegations in April, leading to a succession of meltdown-like drops in the company’s stock price.
Chinese regulators said in August last year that they would take penalties against RuiXing after a months-long investigation into the company.
The incident caused widespread alarm in the market about Chinese companies listed in the U.S. and pressure on U.S.-listed Chinese stocks in general. The Nasdaq stock exchange has proposed tightening listing rules for Chinese companies wishing to list in the United States.
RuiXing is currently in Chapter 11 bankruptcy, but its stores in China are still operating.
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