In late 2017, a Chinese upstart called Luckin Coffee entered what was mostly a luxury sector in China. Starbucks stores in mainland China were prestigious and pricey, but Luckin offered cheaper coffee. Its selling point was that customers could order and pay through its app.
A 2018 report by state-run broadcaster CGTN described Luckin’s “cashless coffee” as a refreshing addition to the market. The reporter demonstrated how she could get delivery to her office in 15 minutes, even for just one iced latte.
Back then, Luckin was seen as a high-tech Starbucks killer, and it appealed to American investors, including Seattle native Owen Sun.
“Being around Starbucks my whole life, I was intrigued [by how different Luckin was],” Sun said. “[Luckin] was very delivery-focused, didn’t have huge stores that they had to maintain with high overhead costs.”
Luckin’s approach also fit the overall trend in China toward mobile payment and cheap deliveries.
The Luckin fraud reignited a long-standing battle for U.S. regulators to access the financial audits of U.S.-listed Chinese firms. Congress has added to that pressure by passing the Holding Foreign Companies Accountable Act, which stipulates that firms cannot trade on U.S. exchanges if they do not comply with the country’s audit rules three years in a row. This gives some 200 Chinese companies until 2024 to comply or delist. U.S. and Chinese regulators are currently in negotiations.
Submitted August 04, 2022 at 04:29AM by WallStreetDoesntBet https://ift.tt/neO61My
