Luckin Coffee Fraud Explained

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In this video we explain the Luckin Coffee fraud. Luckin Coffee is a Chinese premium coffee chain. It IPOed on the US stock market in 2019 and reached a valuation of $9 billion at the peak. However, it turned out a large portion of their revenue was fake. They were exposed as a fraud in early 2020 and delisted from the NASDAQ.

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#WallStreetMillenial

Wall Street Millennial

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A company having an internal investigation and actually concluding they'd done something wrong is what really shocked me.

ImpudentInfidel

A banker once told me that he would never lend money to a company that could not explain HOW it was going to make a profit on a cocktail napkin. Good advice then and good advice today.

genemartin

when the founder said "You don't understand our business model" you know you've been scammed

brent

The CEO’s were fired but not held accountable. They were given the opportunity to sell their stock before the results of the audit came out and simply moved on down the road. It doesn’t matter where you gamble; Las Vegas or New York, the house always wins.

RUSure-jmrp

I've tried their coffee. It was impressive, they manage themselves to make worse coffee than Starbucks

augustoluna

I remember I almost bought stock in this company back in 2019 bc The Montley Fool was recommending it. I ended up buying Dunkin Donuts and Starbucks stock instead. I'm so glad I did lol.

Katsuya

"They do not understand our business model"

Dude, you sell brewed coffee. How hard can it be to grasp?

stefanwolf

This was the first stock I have ever bought for 500$ and it almost made me quit investing instantly but at the same time motivated me to start reading in-depth analysis, books like "The intelligent investor" and become a value investor instead of just buying hype companies. 500$ is not a lot but for a 21 years old it is. However I am happy that this happened because it taught me an important lesson.

Kaloyan.Dimitrov

Its crazy that they didn't even NEED to lie.

MontageHustle

The CEO and COO obviously executed their plan based on the thinking that overseas investors would never know the true situation on the ground. Anyone living in China and visiting any Luckin in any city would have knonw almost immediately that the foot traffic was next to nothing, while anyone caring to saunter over to a Starbucks would see that it's almost impossible to get a seat during peak hours.

mfaass

The people who made the anonymous report were the top brass of the company who had privately short sold stock. They made hundreds of millions

williamdavies

I live in China and I can honestly say that they were sketch from when they opened. They were giving huge discounts and even offering free coffee. Even now it’s my go to coffee shop. Coffee is only 2 dollars sometimes even $1.40 if you’re vip member. It’s great for basic black coffee

lorenzo

if they can't explain their business model to a sixth grader, they're scamming you.

haebee

I remember their Chinese citizens were laughing at the American investors for funding them free coffee. They were right.

ahhchoo

I love how doing business in the 21st is essentially becoming a blitz scaled Ponzi scheme with a little inventory on hand, operate at a massive profit loss, and then hope in 15+ years you can somehow turn your business profitable so you can pay back debts.

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