Luckin Coffee (Anonymous Report)
Muddy Waters / Carson Block · 2020
"Luckin Coffee fabricated sales figures; the growth story is a fraud."
In 2020, Muddy Waters received an anonymous 89-page report proving that Luckin Coffee, China's answer to Starbucks, was fabricating hundreds of millions of dollars in sales. The stock collapsed 80% shortly after.
The anonymous researchers hired 1,500 people to sit in Luckin Coffee shops across China and record 11,260 hours of store traffic video. They collected 25,843 customer receipts and proved that Luckin's app was skipping order numbers to artificially inflate the daily transaction count by over 70%. To balance the books, Luckin then faked massive corporate bulk purchases and inflated their advertising expenses.
How did investigators definitively prove Luckin Coffee was faking its sales?
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