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Episode Info: In episode 324, Rui Ma, co-host of Tech Buzz China podcast and a trusted voice on China Tech joined us on a conversation to dive deeper on the anonymous report that unveiled Luckin Coffee's recent debacle. We start with a quick history of Luckin Coffee with Rui Ma breaking down the backstory on how Luckin Coffee's alleged fraud came to light and the impact after the fallout. Rui Ma dived deeper beyond the original story with an analysis of the anonymous report entitled "Luckin Coffee: Fraud + Fundamentally Broken Business". Last but not least, she discussed the implications of Luckin Coffee's debacle and how investigative reporting and corporate activism will impact the public listings of Chinese companies in the US. Here are the interesting show notes and links to the discussion (with time-stamps included): Rui Ma, Creator & Host of Tech Buzz China podcast by Pandaily produced by SupChina (LinkedIn, @ruima) [0:26] Since our last conversation, what have you been up to? [0:30] Luckin Coffee Debacle [1:36] Disclaimer: The information provided here by our host and guest are not here to encourage buying or selling any equities mentioned here and investing is strictly our audience’s own responsibility. So, please do your homework.  Origins of Luckin Coffee has been covered by Matthew Brennan in Episode 279 and it was starting to challenge Starbucks Cafe in China two years back. Highly recommended: Rui Ma and Ying Ying Lu in Techbuzz China Episode 65 (Extra Buzz Special): Luckin’s luck ran out To help our audience, Luckin Coffee (瑞幸咖啡) started off with the on demand delivery model and did not have physical stores similar to Starbucks. Then it started scaling up by burning investment cash and building physical stores. The investors came from a variety of sources (according to CB Insights): venture capital (JOY Capital), asset management fund (BlackRock), private equity (Centurium Capital), China International Capital Corporation or CICC (investment bank) and GIC (the sovereign wealth fund in Singapore).   Let’s start from today and work backwards to what happened that led to alleged fraud of Luckin Coffee being announced by the company. How was alleged fraud for Luckin Coffee come to public attention? (Source: Luckin Coffee’s filing of 6K) [3:04] What was the alleged fraud about and how much has been uncovered? [4:23] Who are the people behind the alleged fraud? [5:27] What is the impact given the announcement of the alleged fraud by Luckin Coffee, from stock crashing to customers rushing to claim their coffee? (Source: SCMP) [7:08] Luckin Coffee has been a strange story in China. What is the business model that led to them going public? [9:11] The Anonymous Report titled “Luckin Coffee: Fraud + Fundamentally Broken Business” [11:40] Citing the Extra Buzz Newsletter #7: “The report was very extensive 89 pages, utilized 92 full time, 1418 part time staff on the ground who recorded 11,000 hours of video, which is almost ...
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