Luckin Coffee’s shares fell after the company said one of its executives and other employees had faked sales figures.
The Chinese coffee chain has suspended its chief operating officer Jian Liu and his staff.
This comes after the company has appointed a special committee to investigate the problems in its financial statements for 2019.
Luckin, who competes with Starbucks, was one of the few successful US stock quotes last year.
The Nasdaq-listed company said its investigation found that last year’s second quarter to fourth quarter manufactured sales amounted to around 2.2 billion yuan ($ 310 million; £ 250 million). . This equates to around 40% of its estimated annual sales.
He also said that he still needed to investigate and verify other costs and expenses that had been inflated considerably during the same period.
At the same time, Luckin warned investors that they should no longer trust its previous financial statements which had shown the rapid growth of the business.
The company had 3,680 stores at the end of September, according to its 2019 third-quarter earnings release. This represents a six-fold increase from the previous June.
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Luckin’s market value in the United States had almost tripled since its New York debut in May, exceeding $ 50 per share earlier this year.
Mr. Liu has been Luckin’s chief operating officer since May 2018.
In recent months, although investors have started to be wary, there could be serious problems within the company after an anonymous report alleging that it had been part of its figures.
Earlier this year, prominent broker Muddy Waters Research began betting against the company’s shares, citing a report that alleged that Luckin had been manufacturing financial and operating figures as of the third quarter of last year.
At the time, Luckin firmly denied the allegations, calling them “misleading and untrue.”
Luckin’s shares ended Thursday’s trading session down more than 75% to $ 6.40 after hitting a record low of $ 4.90 earlier today.