(Bloomberg) — Banks including Credit Suisse Group AG and Morgan Stanley face a $300 million shortfall on margin loans to the embattled founder of Luckin Coffee Inc.The lenders, which also include Haitong International Securities Group and Goldman Sachs Group Inc., raised about $210 million over the past two months selling Luckin shares that Chairman Lu Zhengyao had pledged as collateral, people familiar with the matter said. Lu defaulted on $518 million of margin debt in early April, Goldman said in a statement at the time, after revelations of accounting fraud caused the Chinese coffee chain’s stock to plunge.The share sales represent the latest attempt by Lu’s creditors to limit losses from a scandal that has fueled calls in Washington for tougher scrutiny of financial ties between the U.S. and China. Luckin’s fall from grace blindsided some of the biggest names on Wall Street just as they were gearing up for a historic expansion into Asia’s largest economy.Spokespeople for the lenders declined to comment. Luckin didn’t immediately respond to multiple requests.Goldman, tapped by lenders to oversee the stake disposal, said in April that it would sell as many as 76.35 million of Luckin’s U.S.-listed shares. The firm has now liquidated the entire position, one of the people said, asking not to be identified discussing private information.A back of the envelope calculation suggests the shares were sold for $2.75 apiece on average. That compares with the closing price of $26.20 before the Luckin scandal emerged and the $3.18 average price since April 6, when Goldman announced plans to offload the stake.Luckin gained 8.3% to $4.32 in pre-market trading as of 5:12 a.m. in New York. The share sales by banks remove one potential overhang for the stock.Credit Suisse and Morgan Stanley each put up about $97 million for the margin loans, while Haitong International lent about $134 million, one of the people said. Goldman and Barclays Plc lent $73 million and $78 million, respectively, while China International Capital Corp. contributed $39 million.It’s still unclear whether the banks will ultimately lose money on the loans. They’re also pursuing the assets of an investment company controlled by Lu’s family trust, Bloomberg News reported last month. The investment company has disputed that it’s in default and has requested an injunction in Hong Kong to prevent liquidation proceedings, according to a May 6 court filing.Lu became a billionaire after his fast-growing Starbucks rival went public in the U.S. last year. But much of his wealth has since been wiped out by the 85% plunge in Luckin’s stock since April, when the company disclosed that some of its employees may have fabricated billions of yuan in sales.Chinese regulators have obtained emails purporting to show Lu instructed financial fraud, business news outlet Caixin reported this month, citing unidentified people close to the agencies. Regulators found evidence of fraud at Luckin in their investigation, Caixin cited several people as saying.Lu has previously denied deceiving investors. “My personal style may have been too aggressive and led the companies to run too fast, which has triggered many problems,” he said in a statement last month. “But I never lied to investors with the idea of ‘selling concepts.’ I’m working hard to make the company bigger and better to create value for society.”(Updates with pre-market gain in Luckin shares in seventh paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
from Yahoo Finance https://ift.tt/3frhdxu
Senator Elizabeth Warren questioned Fed Chairman Jerome Powell about the economic struggles minorities have faced amid the coronavirus pandemic. Shares in DraftKings (DKNG) sank almost 7% in pre-market trading after the U.S. sports betting company announced a public offering to sell its common stock.The stock dropped to $37.80 in early market trading. DraftKings said it has commenced an underwritten public offering of 33 million shares of its Class A common stock, consisting of 14 million shares offered by DraftKings and 19 million shares offered by some of the company’s shareholders.The stockholders intend to grant the underwriters a 30-day option to purchase up to an additional 4.95 million shares of Class A common stock. DraftKings will not receive any proceeds from the sale of Class A common stock offered by the stockholders. The offering is subject to market and other conditions, and there can be no assurance as to whether or when the offering may be completed.DraftKings said it intends to use the net proceeds it receives from the offering for general corporate purposes. Goldman Sachs & Co. and Credit Suisse Securities (USA) are acting as joint book-running managers.The share sale offering comes after the sports gambling went public at the end of April. Since the Nasdaq debut, the stock has more than doubled and is trading at $40.57 as of Tuesday’s close.Five-star analyst Jed Kelly at Oppenheimer last week initiated coverage of the stock with a Buy rating and a $48 price target.“As more states legalize sports gambling, we believe competencies in product development and customer acquisition will allow the company to be a critical player in accelerating the shift in US sports betting from ~$150 billion wagered illegally/ offshore to licensed domestic operators,” Kelly wrote in a note to investors.Although legalized sports betting and iGaming markets are in their very early stages of growth, Kelly estimates for the US legal sports wagering market to grow about 43% annually, reaching about $8 billion by 2025, and $14.4 billion by 2028 as more states regulate sports gaming. The analyst expects DraftKings to achieve about 25% market share.“While a premium valuation and high cash flow burn likely create above-average volatility near term, we emphasize the long-term nature of our rating,” Kelly added.The stock scores 7 Buy ratings versus 1 Hold rating adding up to a Strong Buy analyst consensus. The $43.29 average price target implies 6.7% upside potential in the shares over the coming year. (See DraftKings stock analysis on TipRanks).Related News: iQIYI Pops 35% In Pre-Market On Report Tencent Seeks To Buy Big Stake Nio Completes $428M ADS Offering, Stock Now Up 70% YTD Google Mulling Purchase of Stake in Indian Vodafone Idea More recent articles from Smarter Analyst: * Kamada’s Covid-19 Therapy Approved For Compassionate Use In Israel * Chembio Sinks 59% In Pre-Market As FDA Revokes Its Covid-19 Test; Top Analyst Cuts Rating * HSBC Resumes Plans To Cut 35,000 Jobs Postponed By Pandemic * Oracle Sinks Post-Earnings As Cloud Push Drags On