- Chinese coffee chain Luckin Coffee sank as much as 80% early Thursday after an internal investigation found the company's chief operating officer fabricated sales.
- A special committee discovered Jian Liu and employees reporting to him falsified sales totaling 2.2 billion yuan ($310 million), according to a regulatory filing.
- The company has suspended the individuals involved and will pursue legal action against them, Luckin said in the filing.
- Watch Luckin Coffee trade live here.
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Luckin Coffee shares nosedived as much as 80% Thursday morning after an internal investigation found the business' chief operating officer fabricated sales throughout 2019.
A special committee discovered Jian Liu and employees reporting to him falsified sales adding up to 2.2 billion yuan ($310 million), according to a regulatory filing published Thursday. Investors can no longer rely on Luckin's guidance and earnings metrics for the nine months ended September, the company said.
The company has since suspended the individuals involved in the misconduct and will pursue legal action against them.
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Luckin's internal investigation is in a preliminary phase and an independent auditor still needs to confirm the scope of the sales fabrications. Some costs and expenses were also "substantially inflated" by falsified transactions, the company said in the filing.
Analyst firm Muddy Waters Research shared its short bet against the Starbucks competitor in January, according to CNBC, calling its business fraudulent and "fundamentally broken." Luckin responded by calling the firm's claims "false."
The Chinese coffee chain was founded in October 2017 and made its public trading debut on the Nasdaq in May. Luckin stock spiked 47% the day of its IPO and largely remained above its offering price of $17 per share until Thursday's tumble.
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Luckin Coffee traded at $8.73 per share as of 10:05 a.m. ET Thursday, down roughly 78% year-to-date.
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