I am a Luckin Coffee (NASDAQ:LK) shareholder, and lately, it's not as if I have a choice. The stock has been halted since April 7, shortly after the company revealed that its COO, along with several others at the Chinese coffee-brewing chain, were cooking the books

I'm still a stakeholder because I can't sell my stock. If you own it, you're in my boat. If you're a contrarian -- looking to buy into a stock that last traded 91% below January's all-time high -- you're also out of luck. No one's getting in for now. No one's getting out for now. It's a time capsule of corporate greed and shareholder regret, waiting to be unlocked the moment that the exchange allows Luckin Coffee to start trading again.

A piping hot cup of coffee.

Image source: Getty Images.

Bad cup of Joe

Luckin's preliminary internal investigation unearthed that COO Jian Liu and several employees reporting to him fabricated $310 million in transactions through the final nine months of 2019. Costs and expenses were also inflated substantially. Investors thought that they were buying into the Starbucks (NASDAQ:SBUX) of China, but now it's looking more like the Enron of China.

We don't know what $310 million in inflated sales looks like here because Luckin hasn't filed its fourth-quarter results, but it's a lot. Luckin reported just $348 million in net revenue through the second and third quarters of last year. Analysts were forecasting $324 million for the fourth quarter, so $310 million out of roughly $672 million combined for the nine-month period in question is a pretty big deal. 

Luckin's now bogus numbers were hypnotic. Reported revenue soared 640% in the last quarter. Luckin Coffee's store count of 3,680 at the end of September -- a number the preliminary audit isn't disputing -- was more than triple the number of outlets it had available a year earlier. 

Luckin Coffee isn't Starbucks. It offers small kiosks that lean largely on mobile order and cashless transactions. The locations are cheap to set up and can be staffed lightly, designed for a high volume of low-ticket purchases. It seemed like the perfect way to disrupt Starbucks' takeover of China: betting on mobile-savvy consumers who would lean on the app and canvassing the country with more locations to make things even easier. Luckin seemed to be doing things right in giving China a hometown hero it could root for, and the number of average monthly customers had soared nearly fivefold to 9.3 million in the 12 months ending in September. It had launched Luckin Tea as an independent brand to cash in on China's iconic warm beverage of choice. Now, Luckin is a cautionary tale that will sting the next hot Chinese growth stock with numbers that seem too good to be true. 

Trading is officially halted as the exchange waits on additional information. Does that mean it will get going again the moment Luckin files its fourth-quarter results and restated financials for the entire year? Is there another shoe yet to drop? Your guess is as good as mine at this point. It's not just the U.S. that is grilling Luckin for answers. More than a dozen officers from China's top business and commerce regulatory agency raided Luckin's headquarters over the weekend.  

The stock remains halted, but Luckin Coffee isn't worthless. It's not going to zero unless the numbers are far worse than the initial read. The stores remain open, and folks are still firing up the Luckin app to order a warm brew. Things probably aren't the same. The reputation is smashed to bits. Integrity matters. Will I buy more when I can? Will I sell my stake? I'll want to review the numbers when they are verified, but it will take a lot to make me stay. Luckin Coffee shares have taken a beating, but it's also not the same company I thought I was investing in nearly five months ago.