Luckin Coffee—the China-based equivalent of Starbucks in the United States—is not worth its hill of coffee beans right now, following allegations that the company is a “fundamentally broken business” that fabricated most of its 2019 sales. But it’s not the only China-based company alleged to be running a scam.
“When Luckin Coffee went public in May 2019, it was a fundamentally broken business that was attempting to instill the culture of drinking coffee into Chinese consumers through cut-throat discounts and free giveaway coffee,” begins an 89-page anonymous report shared by short-seller firm Muddy Waters. Right after its $645 million IPO, the company had “evolved into a fraud by fabricating financial and operating numbers” starting in the third quarter of 2019.
