Luckin Coffee Inc., considered to be Starbucks China’s challenger, saw shares plummet 75.6% in Thursday trading after a special committee of three independent directors investigated “misconduct, including fabrication of certain transactions” that spanned during the 2nd to 4th quarters of 2019.
The special committee has discovered Jian Liu, Luckin Coffee COO and Founder and Employees reporting to him fabricated sales adding up to 2.2 billion yuan ($310 million).
“As a result of the investigation, Investors should no longer rely upon the Company’s previous financial statements and earning releases for the nine months ended September 30, 2019 and the two quarters starting April 1, 2019 and ended September 30, 2019, including the prior guidance on net revenues from products for the 4th quarter of 2019, and other communications relating to these consolidated financial statements,” Luckin Coffee said in a statement released recently.
The company has since suspended the individuals involved in the misconduct and will pursue legal action against them.
About Luckin Coffee:
- The Chinese coffee chain was founded in October 2017
- Made its public trading debut on the Nasdaq in May 2019
- Luckin stock spiked 47% the day of its IPO and largely remained above its offering price of $17 per share until Thursday’s tumble
- Luckin Coffee traded at $8.73 per share as of 10:05 a.m. ET Thursday, down roughly 78% year-to-date
- To date, Luckin has over 4,500 outlets in China
- Since going public, Luckin has added smart vending machines called Luckin Pop and Luckin Tea