SHANGHAI (Reuters) - China's Ucar Inc, in which Luckin Coffee (O:LK) Chairman Charles Zhengyao Lu is the biggest shareholder, suspended trading of its shares on Tuesday after regulators questioned the car service provider about how the alleged fraud at Luckin would impact it.
Ucar, in which Lu is chairman and CEO, said in a statement late on Monday that the company applied to halt trading in its shares to avoid abnormal price fluctuations and protect investor interest amid media reports on the company.
Chinese media reports have linked the firm with Luckin, which said last week an internal investigation revealed sales fabrication of about 2.2 billion yuan ($310.80 million).
Ucar said its shares will halt trading on China's New Third Board equity market for as long as a month and will resume trading no later than May 6.
On Friday, the National Equities Exchange and Quotations (NEEQ), operator of the New Third Board, sent a letter to Ucar, asking it to spell out the impact of the Luckin probe on the company.
NEEQ asked the company to explain whether the alleged fraud at Luckin could result in Lu being sued or have his stakes frozen. Ucar was also asked to spell out measures it plans to take to mitigate the risks from the Luckin probe. Lu controls roughly 10% of Ucar.
In addition, the regulator queried Ucar over details of its acquisition of a 67% stake in Beijing Borgward Automobile Co.
Shares of CAR Inc (HK:0699), in which Ucar owns a substantial stake and of which too Lu is chairman, rallied on Tuesday morning after the Hong Kong-listed company said it does not hold a stake in nor has any business dealings with Luckin Coffee.
($1 = 7.0786 Chinese yuan renminbi)