Luckin Coffee COO under investigation after fabricating sales, shares plummet 80%
Shares plummet 80% for China’s coffee giant Luckin Coffee after an investigation found that the company’s COO fabricated sales. Yahoo Finance’s On The Move panel discusses.
Video Transcript
ADAM SHAPIRO: All right, want to move on to another issue, and that has to do with Luckin Coffee. We got the news earlier today that they were under investigation. That's kind of their own impersonal investigation. I want to read you actually what they said, which was a quote, that they were appointing three independent directors to investigate, quote, "misconduct, including fabricating certain transactions." And they suspended their chief operating officer at Luckin. Joining me now to discuss all of this is Julie Hyman. And Julie, Luckin was the big challenger to Starbucks. Now, it doesn't look like they're going to be able to make it.
JULIE HYMAN: Well, I mean, this doesn't necessarily threaten their fundamental business model. What it looks like is that they're now doing this internal investigation into whether some of their reported revenue was fraudulent. It's not all of their revenue. And it's unclear how high up this goes. Right now, they're just talking about it being linked to their chief operating officer. But it's not clear if there are others at the company that were involved. Right now, they're saying not. So unclear how far this will go.
One interesting thing is back here in the US, this company has been a subject of a back and forth campaign between Muddy Waters, which is one short-selling research firm, which had gotten an anonymous report on Luckin, and said that they believed in it, and we're going to short the stock. And then Citron Research, on the other side, Andrew Left's firm, which said that they were long the stock.
BRIAN SOZZI: Yeah, Julie, I should note too, a source familiar with the situation tells me that Luckin Coffee, CFO Reinout Schakel, who we've talked in the past, he is not-- he is not implicated in this. He does not report to the COO. So if there's a minor, minor bright spot here, it's that you never want to see the CFO dragged into a situation like this. But what you're seeing with this move in Luckin Coffee this morning, the stock is down close to 70%. There's a complete lack of trust in the company's financials.
