China’s market regulator launches probe into Luckin Coffee

FILE PHOTO: A cup of 'Luckin Coffee' coffee is poured during the company's IPO at the Nasdaq Market site in New York, U.S., May 17, 2019. REUTERS/Brendan McDermid/File Photo

China’s top market regulator has launched an inspection into Luckin Coffee, joining the country’s securities watchdog in doing so as the coffee chain comes under scrutiny for fabricating millions of dollars worth of sales deals.

Dozens of officers from the State Administration for Market Regulation (SAMR) raided Luckin’s main office in Beijing on Sunday, staying there from morning to evening that day, a source with direct knowledge of the situation told Reuters.

Luckin Coffee confirmed that it was being inspected by the SAMR in a post on its official Weibo account on Monday, saying that it was “actively cooperating” with the regulator, which was trying to understand the company’s operating situation. It did not respond to requests from Reuters for further comment.

The China Securities Regulatory Commission announced earlier this month that it would investigate claims of fraud at Luckin after it announced an internal investigation had shown its chief operating officer and other employees fabricated sales deals worth about 2.2 billion yuan ($310.77 million).

The source, and a second one that has been in touch with regulators, told Reuters the Chinese regulators, in particular the CSRC, were acting on a request by the U.S. Securities and Exchange Commission (SEC) to look into Luckin.

The sources declined to be named because of the sensitivity of the issue.

The SAMR, CSRC and U.S. SEC did not immediately respond to requests for comment.

Shares in Luckin, which aggressively pitched itself as a challenger to Starbucks in China, have plunged by more than 90% from their January high following the news.

Bankers and investors have warned that Luckin’s issues were likely to weigh on other Chinese companies considering a U.S. IPO – a group already affected by the trade tensions of 2019.

Reuters

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.