Luckin Coffee's value plunges after admitting to potential US$300m fraud
Billions were wiped off from its market capitalisation.
Luckin Coffee’s value has dramatically plunged after admitting that senior executives exaggerated sales to boost its company’s worth and reputation.
In a filing, the coffee chain said that COO Jian Liu and an unspecified number of other employees have been suspended whilst the company’s board is investigating their misconduct.
“Certain costs and expenses were also substantially inflated by fabricated transactions during this period,” it said.
Company’s shares dropped by up to 81% after the admission, with the news also wiping away some US$5 billion from its market capitalisation.
Touted as Starbucks’ main competitor in China, the chain employed an aggressive e-commerce-driven expansion strategy that led to them eventually eclipsing the US coffee giant in terms of store count earlier this year.
Luckin has since apologised to customers, promising business as usual. The apology also came as Chinese consumers seek to take advantage of a longstanding offer of a free drink.
