LUCKIN Coffee Inc. said Tuesday that Nasdaq Inc. has given it notice that it plans to delist it from the U.S. stock exchange a month after the Chinese coffee chain disclosed that some of its employees fabricated sales accounts.

The U.S. exchange cited concerns over Luckin’s fabricated transactions and the company’s past failure to publicly disclose material information, Luckin said in a regulatory filing.

Luckin plans to challenge the move before a Nasdaq hearing panel, and will remain listed until this delivers an outcome, most likely in the next two months, the company added.

The move underscores Nasdaq’s renewed focus on the auditing standards of companies on its bourse.

Luckin said in early April that as much as 2.2 billion yuan (US$310 million) in sales last year were fabricated by its chief operating officer Liu Jian and other staff, who had been suspended while the company carried out its investigation.

The falsified numbers equate to about 40 percent of Luckin’s annual sales projected by analysts, according to Refinitiv IBES data.

Luckin, whose shares have been suspended since early April, last week fired its chief executive officer Qian Zhiya, who had led the company since November 2017.

The coffee chain is now facing scrutiny from regulators in both the United States and China over fabricated transactions representing a significant portion of the company’s total revenue. Its offices in China were raided by the authorities last month as part of a multi-agency investigation into its finances.

Founded in June 2017, Luckin, a rival to Starbucks in China, had one of the most successful U.S. IPOs by a Chinese company last year, attracting interest from prominent U.S. investors, including long-only funds and hedge funds.

Shares of the Xiamen-headquartered company slumped more than 80 percent April 2, the day the probe was revealed. Trading was halted April 7.

Luckin has said it has been cooperating with and responding to inquiries from regulatory agencies in both the United States and China.

Luckin Coffee’s battered shares are expected to face a renewed wave of selling when they resume trading in New York today.

The prospect of delisting is likely to trigger a rush for the exits by Luckin’s remaining shareholders, adding to a long list of challenges for the firm.

Banks, including Credit Suisse Group AG, Morgan Stanley and Goldman Sachs Group Inc., are among those with money at stake, after the firms seized control of shares that Luckin’s chairman had pledged as collateral for loans.

“I can’t see what else investors would do other than dump the stock,” said Hou Anyang, a fund manager at Frontsea Asset Management Co. in Shenzhen.

Luckin chairman Lu Zhengyao said in a statement that he’s “deeply disappointed” Nasdaq is moving to delist before the company releases final results of an internal probe into its accounting.

“Luckin has reacted actively according to the initial results of the investigation, including terminating some relevant management and restructuring the board,” Lu said.

(SD-Agencies)