Luckin Coffee Sheds VIE, Navigates PRC Regulatory Scrutiny

TL;DR

**Luckin Coffee's structural cleanup is a positive step, but the lingering legal and regulatory overhang makes it a speculative play.**

AI Summary

Luckin Coffee Inc. (LKNCY) filed its 20-F for the fiscal year ended December 31, 2025, as a Cayman Islands holding company operating primarily through PRC subsidiaries. The company reported 2,158,141,800 Class A Ordinary Shares, 136,172,004 Class B Ordinary Shares, and 295,384,619 senior convertible preferred shares outstanding as of December 31, 2025. A significant corporate structure change occurred on March 15, 2024, with the termination of contractual arrangements with its Former Variable Interest Entity (VIE), Beijing Luckin Coffee Technology Ltd., which previously held foreign restricted licenses. This termination was deemed immaterial financially, as the Former VIE contributed no external revenues to the Group's total revenues for the year ended December 31, 2023, and for the period from January 1, 2024, to the Termination Date. The company continues to face risks related to its past fabricated transactions, ongoing legal proceedings, and the evolving regulatory environment in China, including cybersecurity and data privacy oversight, which could materially affect its business and financial performance.

Why It Matters

For investors, the termination of the Former VIE in March 2024 simplifies Luckin Coffee's corporate structure, potentially reducing complexity and certain regulatory risks associated with VIEs in China. However, the persistent shadow of past fabricated transactions and ongoing legal and governmental investigations creates significant uncertainty, impacting investor confidence and the company's valuation. Employees and customers might see increased stability if the company successfully navigates these challenges, but the evolving PRC regulatory landscape, particularly concerning data privacy and cybersecurity, could introduce new operational hurdles and competitive pressures within the Chinese market, affecting long-term growth prospects.

Risk Assessment

Risk Level: high — The risk level is high due to the explicit mention of 'Fabricated Transactions' first disclosed in 2020, which have exposed the company to 'a number of legal proceedings, investigations and inquiries' and 'material adverse effect on our reputation, business, financial condition, cash flows and results of operations.' Additionally, the company is a defendant in 'a number of lawsuits filed by purchasers of our securities, including class action lawsuits,' which could have a 'material adverse impact.'

Analyst Insight

Investors should exercise extreme caution and conduct thorough due diligence on Luckin Coffee Inc. (LKNCY). Given the ongoing legal and regulatory risks stemming from past fabricated transactions, a wait-and-see approach is advisable until there is clear resolution and sustained evidence of robust internal controls and compliance.

Key Numbers

• 2,158,141,800 — Class A Ordinary Shares outstanding (As of December 31, 2025, indicating the primary equity class.)
• 136,172,004 — Class B Ordinary Shares outstanding (As of December 31, 2025, representing a smaller class of equity.)
• 295,384,619 — Senior convertible preferred shares outstanding (As of December 31, 2025, a significant component of the company's capital structure.)
• RMB7.0063 to US$1.00 — Exchange rate (Used for translations in the annual report as of December 26, 2025.)
• 0% — Former VIE external revenue contribution (For the year ended December 31, 2023, and from January 1, 2024, to March 15, 2024, indicating its immaterial financial impact.)

Key Players & Entities

• Luckin Coffee Inc. (company) — Registrant and Cayman Islands holding company
• Beijing Luckin Coffee Technology Ltd. (company) — Former Variable Interest Entity (VIE) whose contractual arrangements were terminated
• Ms. Jing An (person) — Chief Financial Officer of Luckin Coffee Inc.
• SEC (regulator) — Settlement with the SEC mentioned in forward-looking statements
• PRC authorities (regulator) — Pending and ongoing investigations by PRC authorities
• Cyberspace Administration of China (CAC) (regulator) — Oversight on cybersecurity and data privacy
• China Securities Regulatory Commission (CSRC) (regulator) — Mentioned in definitions
• $0.000002 (dollar_amount) — Par value per share for Class A Ordinary Shares, Class B Ordinary Shares, and Senior Preferred Shares
• March 15, 2024 (date) — Termination Date of contractual arrangements with Former VIE
• December 31, 2025 (date) — Fiscal year end for the 20-F filing and date for outstanding share count

FAQ

Risk Factors

• Past Fabricated Transactions and Ongoing Legal Proceedings [high — legal]: The company continues to face risks stemming from its past fabricated transactions and ongoing legal proceedings. These issues have historically impacted its reputation and financial stability, and could continue to do so.
• Evolving PRC Regulatory Environment [high — regulatory]: Luckin Coffee operates within an evolving regulatory landscape in China, including increased oversight on cybersecurity and data privacy by bodies like the Cyberspace Administration of China (CAC). Non-compliance or changes in these regulations could materially affect its business and financial performance.
• Termination of Former VIE Contractual Arrangements [medium — operational]: The termination of contractual arrangements with its Former Variable Interest Entity (VIE), Beijing Luckin Coffee Technology Ltd., on March 15, 2024, signifies a structural change. While deemed immaterial financially as the Former VIE contributed 0% external revenue in 2023 and early 2024, it indicates a shift in operational structure and potential future implications.

Industry Context

Luckin Coffee operates in the highly competitive Chinese coffee market, which is experiencing rapid growth and increasing consumer sophistication. The industry is characterized by a mix of domestic players and international chains, with a growing emphasis on digital integration, delivery services, and premiumization.

Regulatory Implications

The company faces significant regulatory scrutiny in China, particularly concerning data privacy and cybersecurity, overseen by bodies like the CAC. Changes in these regulations or non-compliance could lead to substantial penalties and operational disruptions.

What Investors Should Do

1. Monitor regulatory developments in China
2. Assess the impact of the Former VIE termination
3. Evaluate legal proceeding outcomes

Key Dates

• 2024-03-15: Termination of contractual arrangements with Former VIE (Beijing Luckin Coffee Technology Ltd.) — Marks a significant corporate restructuring by removing a VIE that previously held foreign restricted licenses, though deemed financially immaterial.

Glossary

VIE

Variable Interest Entity. A structure used by companies to bypass foreign ownership restrictions in certain industries in China. (The termination of the Former VIE arrangement is a key event in the company's structural changes.)

Former VIE

Refers to Beijing Luckin Coffee Technology Ltd., whose financial results were consolidated until March 15, 2024, but was not an equity-owned entity. (Its termination signifies a change in the company's operational and reporting structure.)

CAC

Cyberspace Administration of China. The primary regulatory body for internet and cybersecurity in China. (Its oversight is a key factor in the evolving regulatory risks for Luckin Coffee.)

GMV

Gross Merchandise Volume. The total value of merchandise sold through a company's platform over a given period. (Indicates the total transaction volume on Luckin's platforms, a key performance indicator for retail businesses.)

ADSs

American Depositary Shares. Certificates issued by a U.S. depositary bank representing a specified number of shares of a foreign company's stock. (Represents the form in which many foreign investors hold shares of Chinese companies like Luckin Coffee.)

Year-Over-Year Comparison

The 20-F filing for the fiscal year ended December 31, 2025, details a significant corporate structural change with the termination of contractual arrangements with its Former VIE on March 15, 2024. While this termination was reported as financially immaterial due to the Former VIE's 0% contribution to external revenues in 2023 and early 2024, it signifies a shift in the company's operational framework. The filing also reiterates ongoing risks related to past fabricated transactions and the evolving regulatory landscape in China, including cybersecurity and data privacy, which were likely also present in previous filings but continue to be critical concerns.

Key Financial Figures

• $0.000002 — ht Class A Ordinary Shares, par value US$0.000002 per share LKNCY Class A Ordinary Sh
• $0.001 — gel-1 and angel-2 shares of par value US$0.001 per share; "our mobile apps" refers to
• $ — lculating transacting customer; and "US$," "dollars" or "U.S. dollars" refers to
• $1 — nnual report are made at RMB7.0063 to US$1.00, the exchange rate set forth in the

Filing Documents

• lk-20251231x20f.htm (20-F) — 5550KB
• lk-20251231xex8d1.htm (EX-8.1) — 13KB
• lk-20251231xex11d2.htm (EX-11.2) — 115KB
• lk-20251231xex12d1.htm (EX-12.1) — 13KB
• lk-20251231xex12d2.htm (EX-12.2) — 13KB
• lk-20251231xex13d1.htm (EX-13.1) — 6KB
• lk-20251231xex13d2.htm (EX-13.2) — 5KB
• lk-20251231xex15d1.htm (EX-15.1) — 8KB
• lk-20251231xex15d2.htm (EX-15.2) — 14KB
• lk-20251231xex15d3.htm (EX-15.3) — 3KB
• lk-20251231x20f002.jpg (GRAPHIC) — 95KB
• lk-20251231x20f003.jpg (GRAPHIC) — 126KB
• lk-20251231x20f013.jpg (GRAPHIC) — 18KB
• lk-20251231xex15d1001.jpg (GRAPHIC) — 14KB
• lk-20251231xex15d1002.jpg (GRAPHIC) — 19KB
• lk-20251231xex15d1003.jpg (GRAPHIC) — 36KB
• lk-20251231xex15d2001.jpg (GRAPHIC) — 7KB
• lk-20251231xex15d3001.jpg (GRAPHIC) — 28KB
• 0001104659-26-035712.txt ( ) — 20837KB
• lk-20251231.xsd (EX-101.SCH) — 96KB
• lk-20251231_cal.xml (EX-101.CAL) — 98KB
• lk-20251231_def.xml (EX-101.DEF) — 451KB
• lk-20251231_lab.xml (EX-101.LAB) — 803KB
• lk-20251231_pre.xml (EX-101.PRE) — 665KB
• lk-20251231x20f_htm.xml (XML) — 4262KB

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 155 Item 12.

Description of Securities Other than Equity Securities

Description of Securities Other than Equity Securities 155 PART II 157 Item 13. Defaults, Dividend Arrearages and Delinquencies 157 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds 157 Item 15.

Controls and Procedures

Controls and Procedures 157 Item 16.A. Audit Committee Financial Expert 158 Item 16.B. Code of Ethics 158 Item 16.C. Principal Accountant Fees and Services Auditor Fees 159 Item 16.D. Exemptions from the Listing Standards for Audit Committees 159 Item 16.E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers 159 Item 16.F. Change in Registrant's Certifying Accountant 159 Item 16.G. Corporate Governance 159 Item 16.H. Mine Safety Disclosure 159 Item 16.I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 160 Item 16.J. Insider Trading Policy 160 Item 16.K. Cybersecurity 160 PART III 161 Item 17.

Financial Statements

Financial Statements 161 Item 18.

Financial Statements

Financial Statements 161 Item 19. Exhibits 161 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS F-1 i Table of Contents INTRODUCTION Except where the context otherwise requires and for purposes of this annual report only: "ADSs" refers to the American depositary shares, each representing eight of the Company's Class A Ordinary Shares; "Beijing Wholly Foreign Owned Enterprise", or "Beijing WFOE", refers to Beijing Luckin Coffee Co., Ltd.; "CAC" refers to the Cyberspace Administration of China; "CSRC" refers to the China Securities Regulatory Commission; "Certificate of Designation" refers to the certificate of designation dated November 30, 2021 that the Company adopted to create and issue a new series of preferred shares; "China" or "PRC" refers to the People's Republic of China; and only in the context of describing PRC laws, regulations and other legal or tax matters in this annual report, excludes Taiwan, Hong Kong, and Macau; "Class A Ordinary Shares" refers to the Company's Class A Ordinary Shares of par value US$0.000002 per share; "Class B Ordinary Shares" refers to the Company's Class B Ordinary Shares of par value US$0.000002 per share; "Company" refers to Luckin Coffee Inc., a Cayman Islands exempted company in which investors in the ADSs are purchasing an interest; it is a holding company that does not conduct operations; "former variable interest entity" or "Former VIE" refers to Beijing Luckin Coffee Technology Ltd., which is a PRC company whose financial results had been consolidated into our consolidated financial statements for accounting purposes for the year ended or as of December 31, 2023, but has not been an entity in which we own equity interest; due to the termination of the contractual arrangements entered into by and among the Beijing WFOE, the Former VIE and its shareholders in March 2024, the financial results of the Former VIE will no longer be consolidated into our consolidated financial statements for accounting purpo

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