Luckin' Coffee plunges 76% because it made up its sales number (#fakebrews)

Venti-sized bad karma... In under 3 years, Chinese-owned Luckin' Coffee managed to beat out Starbucks for the role of "Biggest Coffee Chain in China." With around 4.5K sleek shops, scooter delivery, and adorable coffee cups featuring deer silhouettes, what could go wrong? On Thursday, Luckin lost over 75% of its value, nearly $5B. That sort of thing tends to happen when investors find out your sales numbers are fake.

• So 2019 was all a lie? Not a text from your ex. An internal investigation into Luckin' revealed that its COO made up the company's 2019 sales numbers. Creativity in business is great — not so awesome vis-a-vis financial numbers.
• $413M: What Luckin' reported as its net sales for the first 9 months of 2019.
• $310M: The difference between the lie and the truth. If the investigation's findings are correct, Luckin' actually made only $103M in sales — the rest was fake brews.

The red flags were there... and some spotted them early, thanks to an anonymous 89-page report with on-the-ground research from whistleblowers that reads like a John le Carré spy novel:

• 1.5K employees were secretly mobilized to monitor the volume of sales through 25,843 receipts and 11,260 hours of video footage.
• "The Smoking Guns" (the report's own words) = individual store sales were inflated by at least 88% during the end of 2019 (and fudged for the whole year)
• "The Red Flags" (also their words) = Luckin managers have already sold half their Luckin stock — and the CMO was previously sentenced to 18 months in prison.
• Back in Jan, short-seller Muddy Waters Research said it had bet against Luckin' stock after receiving the page-turner report, which it believed was credible.