If You had asked me a year ago where Luckin coffee would be today. I would have told you it would be down the drain.
With Chinese stocks taking a hammering after regulators in China moved to limit the power of Chinese companies seeking money from foreign investors, you would have thought that Luckin’s days would be numbered.
But you’d be wrong. Having flirted with bankruptcy, the company is now making a resurgence worthy of a university management case study.
The company did whatever it took in order to keep its shops open, and since August 2020, the business has been profitable at the store level – the first time in the company’s history.
After Luckin admitted to massive fraud, they were delisted by the US SEC and fined $180m which they agreed to pay. Two Chinese private equity firms pumped the money in so trading could continue. The CEO and Chairman were both fired, and the company restructured the board.
The previous Chairman, Charles Lu, was highlighted by the original whistleblowers as the architect of the fraud, citing suspicious transactions and a track record of similar activity at his other company.
Dr Jinyi Guo holds the current position of joint CEO and Chairman. However, I wonder about the state of corporate governance at the company since Dr Guo was a Director in 2018, during the time when the massive deception took place.
If Guo didn’t know about the fraud when he was a Director of the company, which was so pervasive, I have to question his competence. However, if he was aware, but went along without question, his integrity would come into question.
However, none of this seems to be bothering investors, and more importantly, it’s not bothering the Chinese public who continue to choose their daily brew to be at a Luckin store.