If you purchased or acquired Luckin securities and would like more information about the shareholder class action, please contact Safirstein Metcalf LLP at 1-800-221-0015 or email info@SafirsteinMetcalf.com or fill out the form on the right.
If you wish to serve as lead plaintiff, you must move the Court no later than April 13, 2020. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation. Any member of the putative class may move the Court to serve as lead plaintiff through counsel of their choice or may choose to do nothing and remain an absent class member.
MORE INFORMATION ON THE ALLEGATIONS:
Class action complaints have been filed on behalf of persons or entities who: (1) purchased or otherwise acquired publicly traded Luckin securities from May 17, 2019 through April 2, 2020, inclusive (the “Class Period”); (2) purchased or otherwise acquired Luckin ADSs in or traceable to the Company’s public offering of ADSs conducted on or around May 17, 2019 (the “IPO”); and/or (3) purchased or otherwise acquired Luckin ADSs in or traceable to the Company’s public offering of ADSs conducted on or around January 10, 2020 (the “2020 Offering”, and with the IPO, the “Offerings”).
The complaints allege that the defendants made false and/or misleading statements and/or failed to disclose that: (1) certain of Luckin’s financial performance metrics, including per-store per-day sales, net selling price per item, advertising expenses, and revenue contribution from “other products” were inflated; (2) Luckin’s financial results thus overstated the Company’s financial health and were consequently unreliable and would likely require restatement; and (3) as a result, defendants’ statements about Luckin’s business, operations, and prospects were materially false and/or misleading and/or lacked a reasonable basis at all relevant times.
On January 31, 2020, Muddy Waters published a report alleging that Luckin had fabricated certain of the Company’s financial performance metrics, beginning in 3Q19. The Muddy Waters Report purported to cite “smoking gun evidence,” including, inter alia, thousands of hours of store video, thousands of customer receipts, and diligent monitoring of the Company’s mobile application metrics, which allegedly showed that, since 3Q19, Luckin had inflated its perstore per-day sales figures, its net selling price per item, its advertising expenses, and its revenue contribution from “other products.”
With respect to Luckin’s number of items per-store per-day, the Muddy Waters Report stated that this number “was inflated by at least 69% in 2019 3Q and 88% in 2019 4Q, supported by 11,260 hours of store traffic video” recorded by thousands of on-the-ground staff associated with the author, and that the report’s “offline tracking results of tracking 981 store-days from 2019 4Q showed 263 items per store per day only,” compared to the Company’s report of 444 items per store per day for 3Q19 and an estimated 495 items per store per day for 4Q19 based on the Company’s guidance for that quarter. Specifically, the Muddy Waters Report estimated that 483-506 items per-store per-day was “implied by 4Q Guidance Product Revenue Guidance of RMB 2.1 billion to RMB 2.2 billion, divided by Net selling price per item of RMB 11.8 (Assuming Luckin to report [sic] 5% sequential growth from 2019 3Q of RMB 11.2) and average store number of 4,094.”
With respect to Luckin’s net selling price per item, the Muddy Waters Report disclosed that its staff “gathered 25,843 customer receipts and found that Luckin inflated its net selling price per item by at least RMB 1.23 or 12.3% to artificially sustain the business model,” and that, “[i]n the real case, the store level loss is high at 24.7%-28%.” The report also noted that “25,843 receipts indicate 1.08 and 1.75 items per order for pick-ups and delivery orders respectively or blended 1.14,” and that “[t]his marked a continuously downward trend of items per order from 1.74 in 2018 1Q to 1.14 in 2019 4Q.”
With respect to Luckin’s advertising expenses, the Muddy Waters Report asserted that “[t]hird party media tracking showed that Luckin overstated its 2019 3Q advertising expenses by over 150,” and that “[i]t’s possible that Luckin recycled its overstated advertising expense back to inflate revenue and store-level profit.”
Finally, the Muddy Waters Report asserted that Luckin’s revenue contribution from “other products” was “only about 6% in 2019 3Q, representing nearly 400% inflation, as shown by [inter alia] 25,843 customer receipts.” Specifically, it noted that “for the 981 store-days we tracked, only 2% of the pick-up orders were found containing non-freshly brewed products,” and that “[t]he 25,843 receipts further indicate that 4.9% and 17.5% of items for pick-up and delivery orders were ‘other products’, blended 6.2%, i.e. inflated by nearly 400%.”
On this news, Luckin’s ADS price fell $3.91 per share, or 10.74%, to close at $32.49 per share on January 31, 2020.
In response to the Muddy Waters Report, Luckin denied all of the claims therein. In addition, investor Andrew Left of Citron disclosed that he had taken a long position in Luckin, and, citing data from BCC, stated that the Muddy Waters Report would “fall short on accuracy.”
On February 12, 2020, J Capital, a China-focused investment research firm, published a more detailed report supporting the findings in the Muddy Waters Report and specifically rebutting Citron’s statements in support of Luckin.
Then, on April 2, 2020, Luckin disclosed that an internal investigation had found that millions of dollars in sales were fabricated. On this news, Luckin ADSs plummeted $19.80 per ADS or approximately 75.6% to close $6.40 per ADS on April 2, 2020, damaging investors.