We Call BS on Luckin Coffee – Short📉

Luckin-Coffee-Trouble-$LK-internet-bull-report

We have reasons to believe that the Chinese Luckin Coffee (NASDAQ: $LK) chain – the fastest growing coffee brand in the world – are cooking the numbers.

Their history as a two-and-a-half-year coffee brand on the block that is now even outpacing Starbuck’s aggressive expansion in China – has drawn our suspicion.

And now with the virus outbreak the coffee chain is likely to face decreased demand.

Two good reasons to have a critical look under the hood.

Luckin Coffee debuted with its IPO in May 2019 with a hot $650.8 million offering on Nasdaq – Barrons.

Just a few weeks after raising a private round of funding from Blackrock (which interestingly holds a 6.58% stake in Starbucks).

Shares soared 18% after the initial pricing of $17 per share.

They are today trading $44.67 and peaked at $51.38 just few days ago.

 

Luckin-Coffee-Trouble

The markets are at all time-highs.

Luckin Coffee is burning cash like crazy.

 

Is everything perfectly fine?

Not likely.

At IBR we get weary when we hear about ‘an overnight unicorn’ out of China.

Particularly in light of the numerous fraudulent scams out of China post-08 financial crisis. Many companies were dishonest with their reporting and manipulated information.

Something smells bad with this one – really bad.

Get short in the low 40’s. Our year end target is $7.

 

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Luka Marjanovic

Partner

Luka holds a Bachelor’s in International Business and a Master’s in International Management. During his undergraduate studies he worked as a research assistant in the field of Big Data; founded his own consulting firm providing services to local SME's in various sectors and invested in the capital markets; as well as working pro-bono providing education and career counselling. Prior to his business education, he studied Biology-and-Biotechnology, and served in the Danish Royal Army as Second Sergeant, leading and managing a group under extreme conditions and pressure. Luka has spent significant time abroad, living and working in seven different countries. When he's not in the office, he's chasing the next gusts windsurfing, carving the mountain snowboarding or out in the forest for a jog.

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