0 1 event review
20 17 10, Luckin coffee was founded.
On may 7th, 20 19, Luckin Coffee landed on Nasdaq, raising 695 million dollars, becoming the fastest company in the world from its establishment to IPO.
On February 1 2020, Muddy Water Research, a well-known investigation agency, released an 89-page anonymous short-selling report on Luckin Coffee shares. In this report, Muddy Water believes that Luckin Coffee is fabricating the company's financial and operational data. The conclusion of the survey shows that in the third quarter of 20 19 and the fourth quarter of 20 19, the daily merchandise sales of each Ruixing store were exaggerated by at least 69% and 88% respectively. Luckin Coffee shares plunged 65,438+00.74% to close at $32.49.
How did Ruixing falsify through inflated income?
1) Virtual passenger volume
Inflated sales through the form of "jump number". To put it simply, the menu code should have been "1, 2, 3, 4", but Ruixing added it randomly through "1, 3, 5, 6, 8". In this way, Ruixun's order volume went up. Exaggerated sales and realized the purpose of fictitious income.
2) Unrealistic net selling price
On the other hand, Ruixing quietly raised the net selling price of various commodities. The muddy water short-selling report shows that the retail price of each commodity of Ruixing has at least expanded 1.23 yuan. Due to a large number of coupons and discounts, the actual selling price of Ruixing is only 46% of the list price, not 55% as the management said.
3) inflated advertising fees to increase profits
According to the tracking of the third-party media, Ruixing greatly exaggerated the advertising expenses at 20 19Q3, reaching 150%. Ruixing may recover its exaggerated advertising expenses to increase revenue and store-level profits.
4) Virtual cash flow
The manager of Ruixing cashed out 49% of its shares (accounting for 24% of the total outstanding shares) through stock pledge, and Ruixing may use the funds obtained from the pledge for fictitious cash flow.
The influence of Ruixing's fraud
1, its influence on itself
Financial fraud is a felony in the securities market. In the American market, investors, regulators and judicial departments have severely cracked down on this. Once investors suffer heavy losses due to fraud and fraud, the company may face:
1) investor class action;
2) The huge ticket issued by the 2)SEC (not only money, but also mandatory delisting);
3) criminal responsibility.
In addition to the above three points, China's newly revised "Securities Law" gives the CSRC and the public security and judicial organs "long arm jurisdiction", and Ruixing falsifies.
2. Impact on China Stock Exchange
Ruixing's fraud has damaged the trust of all Chinese stocks. Ruixun's fraud will make all China companies listed in the United States face difficulties in the future, and it does not rule out triggering a large-scale review of all China stocks by the SEC.
3, the impact on intermediaries
As an IPO and daily auditing agency hired by Ruixing, Ernst & Young's core question is: Why did it not find fraud for such a long time, but after the third-party short-selling agency Muddy Water released a detailed investigation report, it found the problem in detail?
Ruixing Business Model and the "Capital Game" Behind it
Lu is copying CAR Inc' s story history of "using the outlet-difficult financing-burning money to expand-packaging and listing-raising the stock price-cashing out-the stock price plummeted" at Luckin Coffee.
Ruixing's business model has its own problems:
Ruixing's statement about the demand for core functional coffee is wrong; The demand market of core functional coffee in China is very small, and it is in a moderate growth trend.
Ruixing's customers are highly sensitive to price and drive the retention rate through preferential price promotion. Ruixing tries to reduce the discount level (that is, increase the effective price) and increase the same-store sales, which is an impossible task. In other words, once Ruixing stops the preferential behavior, most of his customers will disappear.
Since we are in business, the last thing we need to do is whether we can make money. The purpose of an enterprise's existence is to create profits (of course, under the premise of all legal compliance), which is the most sacred mission of an enterprise. Defective unit economy that is unprofitable: Ruixun's broken business model is bound to collapse.