Luckin Coffee denies fraud allegations that sent stock price tumbling - SupChina
Free

We're a new type of news publication

China news you won't read elsewhere.

Weekly Newsletter

Get a roundup of the most important and interesting stories coming out of China.

Podcasts

Sinica, TechBuzz China, and our 6 other shows are the undisputed champs of China podcasts. Listen now.

Feature Articles

Interactive, web-based deep dives into the real China.

Premium

Join the thousands of executives, diplomats, and journalists that rely on SupChina for daily analysis of the full China story.

Daily Newsletter

All the news, every day. Premium analysis directly from our Editor-in-Chief Jeremy Goldkorn.

24/7 Slack Community

Have China-related questions and want answers? Our Slack community is a place to learn, network, and opine.

Free Live Events & More

Monthly live conference calls with leading experts, free entry to SupChina live events in cities around the world, and more.

"A jewel in the crown of China reporting. I go to it, look for it daily. Why? It adds so much insight into the real China. Essential news, culture, color. I find SupChina superior."
— Max Baucus, former U.S. Ambassador to China

Free

We're a new type of news publication

China news you won't read elsewhere.

Weekly Newsletter

Get a roundup of the most important and interesting stories coming out of China.

Podcasts

Sinica, TechBuzz China, and our 6 other shows are the undisputed champs of China podcasts. Listen now.

Feature Articles

Interactive, web-based deep dives into the real China.

OR… for more in-depth analysis and an online community of China-focused professionals:

Learn About Premium Access Now!
Learn More
Minimize
Learn More
Minimize

Luckin Coffee denies fraud allegations that sent stock price tumbling

Shares in Luckin Coffee plummeted by 11% on Friday after Muddy Waters Research, a China-focused short-seller research and investment firm, tweeted that it had placed a large short bet on Luckin’s Nasdaq-listed stock after receiving an 89-page report sent anonymously (and attached to the tweet).

Muddy Waters claims that Luckin has fabricated some financial and operational figures (paywall). After deeming the report authentic, Muddy Waters decided to short Luckin’s stock and publish the report on Twitter. The allegations include that Luckin’s business model is fundamentally broken and it faces major accounting issues. According to the report, the “number of items [sold] per store per day was inflated by at least 69% in 2019 3Q and 88% in 2019 4Q, supported by 11,260 hours of store traffic video.” The videos were apparently recorded by the authors of the report. 

Luckin responded to the report by stating, “The Report alleged the number of items per store per day was inflated in 2019 Q3 and Q4. There are material inconsistencies between the unsubstantiated data presented in the Report and the actual data from the Company’s own system.” Luckin shares were down as much as 27% on Friday until Citron research, a rival short-selling firm rival, defended Luckin and said the firm holds a long position. Before the allegations, Luckin was already struggling against coronavirus challenges that forced manufacturers to freeze output and Luckin to close 200 stores in Wuhan. 

Many critics pointed out that both firms have a significant financial motivation for publicizing their views on Luckin, and the report’s authenticity remains under question. Meanwhile, the company’s stock price has largely recovered.

Share
Caroline Stetson

Caroline is a New York-based writer who recently graduated from Columbia University with a B.A. in East Asian Languages and Cultures, specializing in Mandarin Chinese and the history of U.S.-China relations.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.