On April 2, the company’s board announced that a preliminary investigation indicates that the “aggregate sales amount associated with the fabricated transactions from the second quarter of 2019 to the fourth quarter of 2019 amount to around RMB2.2 billion ($314 million).” Luckin’s stock price crashed.
WSJ – Luckin, Rival to Starbucks in China, Says Employees Fabricated 2019 Sales; Stock Plummets
FT – Luckin Coffee apologises for alleged fraud
TechCrunch – Luckin Coffee’s board initiates investigation into $300M potential fraud
WSJ – Ernst & Young Says It First Found Accounting Issues at Luckin
Dots to connect: more scrutiny for US-listed Chinese companies, investigations into underwriters / lawyers / equity research analysts / auditors, trust issues, the need for Citron & short-sellers, fundamental value of this coffee chain business, internal governance for corporates in China, etc.