The company acknowledged the inflated figures, saw its stock delisted, reorganized its leadership team, and in December reached a $180 million settlement with the U.S. A few weeks later, though, on April 2, Luckin came clean, fessing up to $310 million in made-up money inflows-a large portion of its reported revenue for 2019. short-seller firm, alleging fabricated sales. Luckin initially denied a report, circulated on Jan. In early 2020, after supposedly usurping the Chinese market’s coffee crown from Starbucks’s tiara-donning merlady-as measured by total number of stores (4,500 versus Starbucks’ 4,300)-its valuation soared to an all-time high of $12 billion. By May 2019, it raised $561 million at a $4.2 billion valuation going public on the Nasdaq stock exchange. By the end of 2018, a little more than a year after its founding, Luckin opened more than 2,000 stores and acquired a $2 billion valuation from private investors. Like any good tech startup, executives prioritized growth over profits. The company served up copious discounts and “free” beverage vouchers, cutting the price of its drinks to about a third of the competition’s. Luckin lured people to order drinks for takeout and delivery through its mobile app. But as its acknowledgment of rampant fraudulent accounting would later reveal, the company’s caffeine fever-dreamed ambition-to hook a tea-drinking nation on joe-featured far more froth than substance.Īs one of China’s youngest, hottest so-called unicorn startups, Beijing-based Luckin pitched itself as a tech company rather than a glorified barista biz. Founded in October 2017, the upstart coffee chain grew at an apparently breakneck pace to overtake Starbucks as China’s biggest bean-brew slinger by the start of the year. Geoff Colvin Luckin Coffee’s frothy financesįor a business named Luckin, its luck sure ran out quick. If the Wirecard scandal can spark a similar response, it may do at least some good. Enron’s collapse inspired the Sarbanes-Oxley Act. The stock, which once traded at 191 euros ($233), was recently at 0.43 euros (52 cents).Ī report ordered by the European Parliament calls the Wirecard debacle “a potentially pivotal event for Europe’s capital market” that should trigger wholesale reform of financial market oversight. The company soon announced “a prevailing likelihood” that the missing funds “do not exist.” Braun was arrested the next day and remains in custody. Matters came to a head last June when Wirecard announced that 1.9 billion euros (about $2.1 billion) was “missing.” Braun quickly resigned. When the Singapore police raided Wirecard’s offices there a month later, BaFin banned short-selling of Wirecard stock for two months. In 2019, Germany’s market supervisor, BaFin, launched an investigation-not of Wirecard, but of the Financial Times. Wirecard always denied vehemently that anything was wrong, but the drumbeat of doubts continued. Outsiders, notably journalist Dan McCrum of the Financial Times, had been finding discrepancies in Wirecard’s accounts since 2015. Its rocketlike ascent peaked in 2018, when investors valued it at 24 billion euros ($27 billion) and it joined Germany’s business aristocracy as one of the 30 members of the DAX stock index.īut something wasn’t right.

Wirecard was also a source of pride for Germany and Europe, a seemingly thriving global player in an important new industry dominated by startups in China and the U.S. Its success extended beyond financial growth. GM took its sweet time wiping the egg off its face, waiting until late November to announce that it would effectively back out of the deal.įrom a June peak of $79.73, Nikola’s stock today trades at closer to $17 per share. The deal would have seen GM take a major equity stake and manufacture Nikola’s planned Badger electric pickup. Regardless, Milton soon fell on his sword, resigning as CEO.įor fans of corporate scandal, the truly scintillating element here is that Hindenburg’s report landed a mere two days after General Motors announced plans for a major partnership with Nikola (timing that surely helped Hindenburg profit from its short position). But the company brazenly argued there was no deception, since the firm at the time described the video as showing the vehicle “in motion”-technically true, even if gravity was doing the work instead of hydrogen. That included a 2016 promotional video that purported to show an operational Nikola freight truck but was in fact staged by rolling the truck down a long hill. Short-seller Hindenburg Research claimed in September that Nikola and its CEO, Trevor Milton, had made a string of misrepresentations of its technology. Perhaps inspired by infamous blood-testing firm Theranos, liquid hydrogen trucking startup Nikola has been taking the mantra “fake it ’til you make it” a bit too literally.

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