It didn't look pretty when Luckin Coffee (LKNC.Y -1.68%) announced last week that after an internal investigation, it had discovered fraudulent sales. The Chinese company's stock price plunged 80% on the news after it had already dropped due to COVID-19 concerns.
But the U.S.-traded Chinese company called on customers for first-aid, and they've rallied around the coffee chain company to increase its sales.
Apology accepted
The audit revealed that some employees in the company had embellished $310 million in sales during 2019. The company issued an apology, and Luckin chairman Lu Zhengyao said he was ashamed of what happened. He also issued a call to customers on social media to help out the newly embattled company by coming in and buying coffee. That seems to have worked.
Image source: Getty images.
In an online survey by Quartz Magazine, over half of participants chose "I accept Luckin's apology, it is still a national champion as long as it corrects its mistakes."
Quick rise to the top
Luckin had a much-hyped initial public offering (IPO) in 2017 and its share price had risen to a high of $50 in January 2019 before coronavirus knocked it down.
The Chinese market feels good about a home-grown rival to Starbucks, which has seen explosive growth in the region. Luckin quickly grew from nine stores in 2017 to a current 4,500, whereas Starbucks has 4,200 coffee shops in China. Luckin's customers also enjoy the prices, which are significantly lower than Starbucks'.
Luckin Coffee is trading at $4.89 as of this morning.
