China's Luckin Coffee has overcome its fraud scandal
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Illustration: Aïda Amer/Axios
Luckin Coffee's fortunes have perked up, four years after an accounting scandal cost the Chinese company its top executives, its Nasdaq listing, and $180 million in fines.
Why it matters: Many had left Luckin for dead, assuming its remains would get steamrolled by Starbucks.
Catch up quick: Luckin launched in 2017 as a low-cost, no-frills coffee chain in a country still dominated by tea-drinkers.
- It soon secured big money from private market investors — including BlackRock, which was and is Starbucks' second-largest shareholder — and went public in 2019 at a $4.3 billion valuation.
- Trouble began in early 2020 when short-sellers suspected that the company had inflated its sales figures, including numbers that investors had relied on for both a secondary share sale and convertible debt offering.
- Luckin soon admitted the fabrication and canned its CEO and COO. Next came the Nasdaq relisting, SEC settlement, and $260 million bailout investment from insiders.
- It continued to trade over-the-counter, and in 2022 sold a control stake to a private equity group that included early backer Centurium Capital, IDG Capital, and Ares Management.
Fast forward: Luckin took the private equity money and embarked on a massive expansion drive, doubling its number of stores in 2023 and increasing its revenue by 87%. It also expanded its menu to include more sweet drinks.
- Luckin now had more China stores and revenue than does Starbucks, which continues to invest in the country.
- That's helped drive shares over $18, up from its $1.39 per share depths in May 2020. The market cap has surpassed the IPO mark, and there's even chatter about it relisting on the Nasdaq.


Caveats: Luckin still isn't profitable, owing both to its new store spend and a pricing strategy that has inherently low margins.
- It also still faces stiff competition from both Starbucks and Cotti Coffee, which was founded by the fired Luckin execs.
The bottom line: It's hard to keep a cheap coffee chain down.
