... Often you have to cover your position at the absolute wrong price -- even when you know you are right. Luckin Coffee announced Friday that its board of directors is moving to force out director and Chairman Charles Zhengyao Lu following an internal investigation of a financial scandal… {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} The company had been dubbed "China's Starbucks" by the financial press, a concept that was simple for investors to grasp. The stock tumbled by more than 90% from its high in January.In May, before it was revealed that he was being investigated by the regulator, Lu issued a self-pitying apology, saying: "My style might have been too aggressive and the company may have been growing too fast. "Lu is a street fighter. The borrowing cost could spiral, and the shares could be recalled at any time.One Hong Kong hedge fund manager says he considered shorting but decided the potential downside for his fund was too great. "Sign up to our newsletters to get our best stories delivered straight to your inbox. Why did the company not wait another few months and go public with better sales figures and the right regulatory approvals in place?The answer was simple.

But this one seems to have had far greater impact.For one thing, it has provided fuel for anti-China rhetorical fire in the U.S., just as the two countries' sparring ground moves from trade to finance.
Regions The underwriters to which Lu had pledged shares as collateral prepared to dump their stakes. "When both were ousted from the board of the company they helped to create, it looked like closure. China's Luckin Coffee has sacked two of its top bosses after new evidence came to light about an accounting scandal. Since its founding in 2017, Luckin had grown enormously fast, boasting more outlets than Starbucks and more than $1.5 billion in investments. All of its transactions took place on the Luckin app, allowing the company to build a massive database of middle-class Chinese consumers.

I have been in deep pain and remorse.


The company also said it was "actively co-operating" with the probe, and that its stores remained open across the country.Luckin Coffee did not immediately respond to a request from the BBC for further comment.The country's top securities regulator, the China Securities Regulatory Commission, is already carrying out its own probe into Luckin.Earlier this month Luckin said it had suspended its chief operating officer Jian Liu and staff reporting to him.Luckin said an investigation had found that fabricated sales from the second quarter of last year to the fourth quarter amounted to about 40% of its estimated annual sales.As of the end of September the coffee chain had 3,680 stores, according to its third quarter 2019 earnings release. © Reuters "As executives at the firm reviewed the coffee chain's offer memo, they felt vindicated in their decision.

That requirement expired in January, and Centurium sold down its shareholding, retaining a 7% stake.Lu and Qian both pledged large amounts of their shareholdings to units of the underwriters as collateral for loans in a form of cashing out. Regions For it to be profitable, prices would have to rise, and customers would desert the brand, the report says. To make a profit, it would need to drastically raise the price of its coffee.The prospectus noted that among the company's risks was the fact that many of the outlets from which it was currently selling coffee did not have the requisite regulatory approvals.There was also a loan -- described by one director as a "bridge loan" -- to Lu from one of the company's banks, which the chairman had then on-lent to Luckin. The accounting scandal at Luckin Coffee, a start-up that aimed to displace Starbucks in China, has caught out several of the world’s most powerful investors. "Any financial improvement just comes from burning their investors' cash. "It is the most risky thing in our business. But it also protects the core Chinese company through a host of offshore shell companies and subsidiaries.


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