Luckin Coffee Scandal

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Running head: LUCKIN COFFEE SCANDAL

Luckin Coffee Scandal

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LUCKIN COFFEE SCANDAL 2

Luckin Coffee is a Chinese company founded in October 2017 by Lu Zhengyao and

Jenny Qian Zhiya. The idea to form the company was Qian's, with Lu being an angel investor for

the startup. In January 2019, the company was listed in NASDAQ and started trading (Yang & Lv,

2019). By the end of 2019, it had become Starbucks' main competition in China, with more than

4,000 kiosks. This was more than Starbuck's coffee shops in China, hence making it Starbucks

'Starbuck's main competitor. The coffee stores for Luckin are pick-up stations at colleges and

office buildings. They usually use an online ordering and delivery system. Due to its rapid

growth, its stocks soar high, attracting many investors from the U.S. However, as later revealed,

these investors were lured into investing in the company.

According to Peng (2020), the Luckin coffee scandal occurred in 2019/2020. In January

2020, Muddy Waters Research firm published a report on Twitter claiming that they had video

coverage that proved Luckin Coffee had falsified their sales. In its defense, the company claimed

that those were malicious publications and that the research methodology was unreliable. On the

contrary, the company agreed to the falsification three months later.

According to a revelation made by the company in April of 2020, the 2019 finances were

inflated by US$310 million. However, the company noted that this falsification was made by the

company's chief operating officer Jian Liu. The scandal involved the fabrication of financial

information in attracting investors to buy their shares. The financial fraud at Luckin Coffee also

involved obtaining money through false bank statements and failure to disclose revenue and

expenses accurately. The company boasted of its competition to Starbucks in China, making its

shares soar high (Kukreja, 2021).

In 2018, Luckin had made accusations against Starbucks for unfair competition since it

had signed exclusive contracts with suppliers. Starbucks did not back on this, and the company

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Running head: LUCKIN COFFEE SCANDAL Luckin Coffee Scandal Instiution Affiliation Student’s Name Date of Submission LUCKIN COFFEE SCANDAL 2 Luckin Coffee is a Chinese company founded in October 2017 by Lu Zhengyao and Jenny Qian Zhiya. The idea to form the company was Qian's, with Lu being an angel investor for the startup. In January 2019, the company was listed in NASDAQ and started trading (Yang & Lv, 2019). By the end of 2019, it had become Starbucks' main competition in China, with more than 4,000 kiosks. This was more than Starbuck's coffee shops in China, hence making it Starbucks 'Starbuck's main competitor. The coffee stores for Luckin are pick-up stations at colleges and office buildings. They usually use an online ordering and delivery system. Due to its rapid growth, its stocks soar high, attracting many investors from the U.S. However, as later revealed, these investors were lured into investing in the company. According to Peng (2020), the Luckin coffee scandal occurred in 2019/2020. In January 2020, Muddy Waters Research firm published a report on Twitter claiming that they had video coverage that proved Luckin Coffee had falsified their sales. In its defense ...
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