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Luckin Coffee plunges 81% as it reveals probe into cooked-up sales
Published on: 2020-04-03
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The giant video screen on the Nasdaq stock exchange in New Yorks Times Square is decorated for the Luckin Coffee initial public offering on Friday May 17 2019The giant video screen on the Nasdaq stock exchange in New York's Times Square is decorated for the Luckin Coffee initial public offering on Friday, May 17, 2019

Luckin Coffee fabricated hundreds of millions of dollars worth of coffee orders last year, according to an internal investigation.

On Thursday, the company announced that its preliminary investigation uncovered fabricated transactions accounting for a total of RMB 2.2 billion ($310 million) from the second to the fourth quarter of 2019. Certain costs and expenses had also been substantially inflated, according to the investigation.

luckinBased on its falsified financials, Luckin Coffee was expected to generate $732 million in sales in 2019, according to Investor Place. In other words, the fabricated transactions appear to have made up almost half of the chain's sales in 2019.

In a statement, Luckin Coffee said that its chief operating officer Jian Liu and several other employees were engaging in misconduct, including fabricating transactions, starting in the second quarter of 2019.

"The Special Committee recommended certain interim remedial measures, including the suspension of Mr. Jian Liu and such employees implicated in the misconduct and the suspension and termination of contracts and dealings with the parties involved in the identified fabricated transactions," Luckin Coffee said in a statement.

A Luckin Coffee executive photographs a cup during the companys initial public offering at the Nasdaq Market in May 2019A Luckin Coffee executive photographs a cup during the company's initial public offering at the Nasdaq Market in May 2019

In February, Luckin Coffee denied what it called "misleading and false allegations" that the chain had inflated sales.

After the company announced the findings of the internal investigation Thursday morning, Luckin Coffee shares plummeted more than 84%.

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