Chinese coffee chain Luckin, once lauded for its overt attempt to dethrone Starbucks within the country, has fired or suspended eight executives over the fraudulent misrepresentation of sales data last year.
Luckin executives Jenny Zhiya Qian, who was CEO, and Jian Liu, COO, have been sacked over the highly publicized scandal that saw its stock price plummet more than 70 percent on New York’s Nasdaq stock exchange before trading in the stock was suspended.
In earnings statements, the company overreported sales by at least RMB2.2 billion (US$310 million). When the misrepresentation was revealed by a whistleblower the company announced an investigation, suspending Liu.
According to reporting in the South China Morning Post, six other Luckin executives and employees who were involved in or had knowledge of the fraud have also been placed on suspension or leave. The firm’s senior VP Jinyi Guo has been appointed acting CEO.
The true extent of the misrepresentations still remains unclear while a panel reviews financial records, however, last November, the company claimed sales were running at six-times the rate of the previous year.
Prior to its listing in the US, the company secured investment from the Singapore Government sovereign wealth fund GIC and China International Capital Corp, among others. It raised US$778 million in early January, and $645 million in a US IPO.
“The company will continue to cooperate with the internal investigation and focus on growing its business under the leadership of the board and current senior management,” said a statement this week issued by the firm’s board.
Luckin expanded swiftly since its inception three years ago, and operated more than 4500 locations in China by late last year, surpassing Starbucks’ 4300 outlets. At the time, Luckin was determined to overthrow Starbucks through aggressive growth and app-based purchasing prioritizing takeaway and deliveries.
Top Luckin executives fired over faked sales data