浑水做空瑞幸咖啡报告.pdf

Luckin Coffee: Fraud + Fundamentally Broken Business

Executive Summary

When Luckin Coffee (NASDAQ: LK) (“Luckin” or the “Company”) went public in May 2019, it was a fundamentally broken
business that was attempting to instill the culture of drinking coffee into Chinese consumers through cut-throat discounts and free
giveaway coffee. Right after its USD 645 million IPO, the Company had evolved into a fraud by fabricating financial and operating
numbers starting in 3rd quarter 2019. It delivered a set of results that showcased a dramatic business inflection point and sent its
stock price up over 160% in a little over 2 months. Not surprisingly, it wasted no time to successfully raise another USD billion
(including secondary placement) in January 2020. Luckin knows exactly what investors are looking for, how to position itself as a
growth stock with a fantastic story, and what key metrics to manipulate to maximize investor confidence. This report consists of
two parts: the fraud and the fundamentally broken business, where we separately demonstrate how Luckin faked its numbers
and why its business model is inherently flawed.


Part One: The Fraud

Smoking Gun Evidence #1: Number of items per store per day was inflated by at least 69% in 2019 3Q and 88% in 2019 4Q,
supported by 11,260 hours of store traffic video. We mobilized 92 full-time and 1,418 part-time staff on the ground to run
surveillance and record store traffic for 981 store-days covering 100% of the operating hours. Store selection was based on
distribution by city and location type, the same as Luckin’s total directly-operated store portfolio.

Smoking Gun Evidence #2: Luckin’s “Items per order” has declined from in 2019 2Q to in 2019 4Q.

Smoking Gun Evidence #3: We gathered 25,843 customer receipts and found that Luckin inflated its net selling price p