Luckin Coffee has fired its chief executive officer (CEO) and chief operating officer (COO) after new evidence surfaced regarding an accounting scandal at the company.
Jenny Zhiya Qian, who has acted as Luckin CEO since November 2017, and COO Jian Liu have now officially been removed from their positions as the company found new evidence relating to hundred of millions of dollars worth of ‘fabricated transactions’. Both Jenny Zhiya Qian and Jian Liu have also resigned as members of the board at the company.
Shares in the coffee chain plunged 80% in April, as Luckin Coffee announced that an internal investigation had found several Luckin employees including the company’s COO Jian Liu were responsible for ‘fabricating’ RMB2.2 billion ($310 million) worth of sales in 2019.
Six other Luckin employees who were involved in or had the knowledge of the fabricated transactions have also been suspended, the company announced this week.
The internal committee in charge of the investigation claimed in April that Jian Liu and several Luckin employees reporting to him “had engaged in certain misconduct, including fabricating certain transactions”, from the second quarter of 2019 to the fourth quarter of 2019.
The committee also alleges that certain expenses and other costs “were also substantially inflated by fabricated transactions during this period.”
As a result of the dismissals – Jinyi Guo, a senior vice-president and member of the board at the company – has been appointed as the acting CEO of the company on a interim basis, while Wenbao Cao and Gang Wu have been appointed as directors.
The company was established in 2017 and has attempted to establish itself as a direct rival to US coffee giant Starbucks through an aggressive expansion strategy. The company currently operates an estimated 4,500 coffee chains throughout China, compared to approximately 4,123 Starbucks locations.
Luckin Coffee was publicly listed on the New York Stock Exchange in May 2019, and stock prices reached a peak of $51.38 per share in January. Following the announcement of the fabricated transactions in April, this dropped to $4.91 per share as the company announced that investors could no longer rely on the chain’s previously published financial statements and guidance.
© FoodBev Media Ltd 2020
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