Consumers swamp Luckin Coffee app in wake of controversy
Disgraced Chinese coffee giant Luckin has apologised to customers and promised business as usual following a widely publicised admission that the firm had fabricated sales figures.
The apology came while downloads of its delivery app skyrocket as Chinese consumers seek to take advantage of a longstanding offer of a free drink. Reporting suggests downloaders are eager to cash in on the offer while the company’s future remains in question.
The scramble to download the app has made it temporarily the second-most-popular free app in China, up from its usual ranking of around 70th to 100th place. In some cities services offered via the app have frozen due to demand overload.
Observers both within China and worldwide were stunned by the shocking admission that the firm’s COO and other staff had filed false sales data in an attempt to boost the company’s value within a year of its IPO. The news wiped more than US$5 billion off Luckin Coffee’s market capitalisation and sent its share price plummeting 80 per cent as stockholders dumped their stakes.
On Monday, Luckin’s chairman Charles Zhengyao Lu and CEO Jenny Zhiya Qian conceded their shares to lenders after defaulting on a $518 million margin loan. Class B shares totalling 515,355,752 and 95,445,000 class A shares in the firm had been pledged as loan security.
Banks involved in the loan, including Goldman Sachs, Morgan Stanley, Credit Suisse, Haitong, CICC and Barclays are now holding discussions on a potential sale of the shares.
Before the revelation, Luckin had been widely heralded as a serious competitor to Starbucks within the territory, surpassing the total number of outlets operated by Starbucks China earlier this year.