China’s on-demand beverage chain Luckin Coffee (NASDAQ: LK) saw its app downloads soar after the company revealed in a filing to the US Securities and Exchange Commission (SEC) on Friday that it had “fabricated” RMB 2.2 billion (USD 310.5 million) in transactions.
Downloads of the Luckin app hit a daily record on the iOS app store in China on Sunday, according to a CNN report, citing data from mobile data analytics company Apptopia. The app was installed 307,000 times alone on that day, beating its previous record of 107,000 installs in October 2018.
The firm’s app, the main platform for customers to order coffee at Luckin’s stores (besides its WeChat mini program), still holds the second place on Apple’s top free app chart as of Tuesday, beating Alibaba’s office app DingTalk and ByteDance’s short-video app Douyin.
One possible drive for this sudden surge is customers’ fear that their pre-paid coffee coupons won’t be redeemable in the future if the alleged fraud leads the company towards bankruptcy, local media Rancaijing suggested. Also, some unfazed consumers said that they will still buy coffee from Luckin, as it is a more affordable alternative to US-based coffee chain Starbucks.
Luckin has been under the spotlight for the past few days after the company announced an internal investigation on April 2 into the conduct of its chief operating officer Liu Jian, who is believed to have inflated revenues by RMB 2.2 billion (USD 310.5 million).
The Nasdaq-listed coffee startup’s share price fell over 75% on that day.
Luckin issued an apology for the fraud on microblogging platform Weibo on Sunday, saying that Liu, and several other employees who report to him, have been suspended, and added that the firm will immediately disclose the investigation results to the public.
“We will take all the necessary measures for remedy and will not avoid any problems brought by this matter,” the announcement reads. Luckin will also maintain its normal operations in the meantime, the firm said.
The company’s chairman, Lu Zhengyao, also responded to the scandal on social media. “I’m deeply ashamed. I’ll take the responsibility regardless of the final investigation results of the independent committee,” he wrote on his WeChat Moments feed on Sunday.
Meanwhile, on March 6, 10 US law firms have announced to file a lawsuit against Luckin on behalf of investors. In a response to local tech media 36Kr, two of these law firms, Hagens Berman and Kahn Swick & Foti, said that while Luckin’s admission of the fabricated transactions may increase chances of winning the case for investors, the lawsuit may last between three to 10 years before demandants could get any compensation.
Luckin’s shares fell over 18% to its lowest-ever price at USD 4.39 as of Monday, with a market capitalization of USD 1.11 billion.
36Kr is KrASIA’s parent company.
