Luckin Coffee stock plummets after COO suspended following alleged misconduct

Yahoo Finance's Alexis Christoforous and Brian Sozzi discuss China's investigation into Luckin Coffee's alleged fake sales.

Video Transcript

ALEXIS CHRISTOFOROUS: I am looking at Luckin Coffee, China-based Luckin, absolutely getting creamed in the premarket. The stock is off some 84%. And, Brian Sozzi, you seem to know why. What's going on?

BRIAN SOZZI: Yeah, you never want to to hear this. But apparently, there is a-- a potential accounting issue with inside of Luckin Coffee. That's why the stock is crashing. Let me read real quickly off the press release here. It says "A special committee has brought to the attention of Luckin's board information that, beginning in the second quarter of 2019, the company's chief operating officer, Mr. Jian Lu, and a director of the company engaged in certain misconduct, including fabricating certain transactions."

Now, keep in mind, Luckin Coffee has-- they have put up some mind blowing growth rates over the past year. It was one of the hottest IPOs in the market last year. But anytime you see anything related to an accounting issue, especially with an overseas company, you're going to get a market crash like you're seeing here in the premarket.