The following is excerpted from an article that originally appeared on CapitalWatch
Most of us know the story of Luckin Coffee (Pink: LKNCY). In a nutshell, the company was supposed to be the “Starbucks of China” giving the American coffee giant a run for its money on the Mainland. The Beijing-based company launched in 2017 and quickly grew its stores and pick-up locations to rival Starbucks Corporation (NASDAQ: SBUX) in China. The stock exploded in popularity. And then, it just exploded.
First, reports emerged in January that Luckin had fabricated its financial data, an allegation which the company, of course, denied. Then regulators launched a probe into Luckin in April and found that the company violated Chinese competition laws by inflating its operational data with false statistics to “deceive and mislead the public.”
Regulators also discovered that Luckin falsely increased its 2019 profit margin