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Fortunately, the Swiss own coffee foam blowing up capital, a puncture himself.
April 2 evening, Xing Rui coffee (Nasdaq: LK) announced that its board of directors has become a special committee to oversee an internal investigation - survey released by the company show that its internal fake transactions worth some $ 2.2 billion Renminbi.
Affected by this news, Swiss fortunate coffee stocks share price fell madness - before the market opened, the Swiss fortunate coffee enlarged decline more than 80%, the previous day's closing price of $ 2.62 to $ 4.91; after the opening bell, the stock fell rapidly Rui Xing , appeared repeatedly blown.
Lei Feng network as of press time, the Swiss fortunate coffee has hit an intraday fifth blown.
Fraud from the beginning of 2019 Q2, COO Mrs has been suspended
According to documents filed with the Swiss coffee fortunate United States Securities Commission, the auditing firm during the fiscal year consolidated financial statements of December 31, 2019 ended, a number of issues led to the concern of the board of directors; and after the above-mentioned special committee was established, which will internal problems to supervise the investigation.
Documents show that since the second quarter of 2019, Swiss fortunate coffee Director and COO (Chief Operating Officer) and Mrs several of its subsidiaries engaged in a number of irregularities, including the manufacturing of the transaction; the Special Committee recommends to take certain interim remedies - - including suspension of Mrs COO and related employees, and the suspension and termination of contracts and transactions have been identified and fabrications involved in the transaction parties.
Currently, Mrs Fortunately, coffee has been suspended Swiss board of directors.
The figure for the MRS
Internal investigation shows that since the second quarter of 2019 to the fourth quarter, total sales related to the fabrication of the transaction is about 2.2 billion yuan; in the meantime, certain costs and expenses also due to a substantial expansion of fabricated transactions, but this figure is not after verification, it is possible to change with the internal investigation.
Fortunately, the Swiss side also said that investors should not rely on the company's previous financial statements and earnings as of September 30, 2019 and the nine months April 1, 2019 to September 30, 2019 published two quarters, and other communications relating to the financial statements.
Finally, Rui Xing also said that the current investigation is still underway, the Swiss fortunate coffee will announce additional information on an internal investigation in due course, and promised to take appropriate measures to improve internal mechanisms.
Muddy Waters was short, and now the real hammer
In fact, the Swiss coffee fortunately broke the news internal fraud, not surprising.
As early as the end of January 2020, to well-known hunting takes stock of US short-seller Muddy Waters (Muddy Waters Research) will be targeting has been controversy-ridden Swiss fortunate coffee, issued a up to 89 on Twitter Short selling report page.
At that time, the muddy water company said the report from an anonymous email, Zhang authors collected more than 25,000 votes, more than 10,000 hours of video stores and a large number of internal micro-channel chats as evidence, evidence Mingrui coffee fortunate third in 2019 there are serious data fraud and fourth quarters.
Authors also report that there is a defect Fortunately, the Swiss coffee business model unsustainable.
At that time, on the same day this short selling report issued by the Swiss fortunate coffee price fell more than 20% in intraday, closing at $ 32.49 / share, down 10.74% over the previous day.
At the beginning of this report, it is written like this:
Fortunately, when the Swiss coffee market in May 2019, it is basically a business fails to instill a cup of coffee culture to Chinese users by the high discounts and complimentary ......
Report that Xing Rui advocate for the core functions of demand for coffee is wrong, because the current Chinese coffee market is still niche and slow growth; and Rui Fortunately, the coffee price sensitive customers, while reducing discounts, increasing same-store sales It is an impossible task.
Meanwhile, the Swiss coffee fortunate lack of non-coffee products in the core competitiveness, has been listed only introduced a generation of tea drinks, fresh tea is far behind other brands. In addition, last September launched deer tea franchise model has not been wholly owned stores at least one year experience in operating risk.
Thus, the report said the Swiss fortunate to know exactly what investors are looking for, how to position yourself as a wonderful story of growth stocks, and what are the key indicators manipulated to maximize investor confidence.
Shows how the Swiss were fortunate to be forged data, and why its business model is inherently flawed - Subsequently, the report by two parts - fraud and the collapse of basic services.
Among them, in addition to subjective judgment, the authors report also gives a lot of evidence. In the survey of Swiss coffee fortune, he employs 92 full-time and 1418 part-time investigators, Zhang won 25843 votes in the 981 days recorded hours of operation set up more than 11,260 hours of video stores and collect a large number of internal staff micro-channel chats.
According to the information collected, the authors believe that the presence of Swiss coffee lucky "fraudulent" behavior in five areas:
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1. Rui Xing coffee exaggerate the number of sales outlets of goods, the 2019 third quarter and fourth quarter, merchandise sales per store per day overstated by 69% and 88% at least;
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2. The data summarized small ticket, the number of items the customer orders appear decreased from 1.38 per unit product in the second quarter 2019, down to 1.14 per unit;
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3. Although the Swiss Fortunately, the net selling price of each product increased by at least 1.23 yuan, or 12.3%, but in reality the loss is still at the store level between 24.7% -28%, "at the current price level, they can only by day profit per store to achieve sales of 800 goods store level, otherwise they will effectively have to raise the price to a minimum 13 yuan. that's why they need to fabricate ASP (average selling price, the average selling price) to maintain their figures business model".
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4. The report said that Swiss Q3 2019 operating profit fortunate stores may be exaggerated 397 million yuan, advertising spending season may also be overstated by more than 150%. Further speculated that the Swiss fortunate coffee is likely to be exaggerated advertising cost recovery to go back to the store to increase revenue and profits, thus disguising cover up the truth of the store is still at a loss;
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The data summarized small ticket, income derived from Swiss coffee fortunate "other products" (bottled drinks, nuts, meals, mugs, etc.) in the third quarter 2019 accounted for only 6% of revenue, not media coverage twenty three%.
In addition, the report will also be directed at Swiss fortunate coffee management, and disclosure of the "danger signal" investors need to pay attention.
First, its management has said the Swiss fortunate coffee fulfilled 49% of the shares (or 24% of the total outstanding shares) through the stock pledge, which makes investors face the risk of price collapse caused by margin calls.
Secondly, the Swiss fortunate recently by subsequent issuance of convertible bonds and raised $ 865 million to develop its "no retail" strategy, which is likely to absorb large amounts of cash from the management company and easy way.
Finally, the above report the transaction to the Swiss fortunate Group Chairman Lu Zhengyao, independent director Sean Shao, co-founder and chief marketing officer Yang Fei past experience questioned.
Burst the bubble was
Despite a wealth of evidence given in the report, but because of the identity of the anonymous author of the report, the Swiss fortunate coffee being questioned limited, the company's shares fell more than 20%.
But the specific contents of the report's point of view, confidence is high. For example, in the 89 report, based on analysis of 25843 Zhang ticket information accounted for the vast majority, the report also for the reasonableness of these small ticket data, rigor has been discussed a lot of space.
Fortunately for the Swiss short coffee is concerned, chanson capital Executive Director Shen Meng also expressed their views. Shen Meng said that throughout its views on the Swiss fortunate are: from the coffee retail point of view, does not have the possibility of success. he thinks:
Fortunately, because the vast majority of Swiss customers are attracted its price and convenience, the brand itself is low contribution to customer stickiness. This means that, when the difference Swiss fortunate with competing products in terms of price or convenience reduced to insignificant state, Swiss fortunate may lose a lot of customers, thus affecting performance. But consumption data formed by the low prices to attract customers, you can tap the potential value sold to other consumer groups also aimed at the enterprise.
It is worth mentioning that, at that time, fortunately for the Swiss short coffee is concerned, another short-seller Citron Research (citron) also issued opinions at odds with Muddy Waters February 1st. Citron said:
We have also received reports, but Citron through business data, applications, downloads, and interviews with Swiss fortunate competitors have confirmed data, evidence Mingrui Fortunately, the outbreak in China business. Citron respect muddy water, but the anonymous report is not accurate, expect the Swiss government declared respond fortunate.
To the February 3, Swiss fortunate coffee gives strong official response, denied any quality control of muddy water, he said:
Fortunately, the Swiss coffee vehemently denied all the allegations in the report. Flawed reasoning of the report, so-called evidence report contains no conclusive facts and allegations in the report are based on unfounded speculation and malicious interpretation of events. In addition, the report also attacked the Swiss fortunate coffee management team, shareholders and business partners, this claim is false, misleading or totally irrelevant. The company believes there is a fundamental misunderstanding of the company's business model and operating environment of the report. Fortunately, the Swiss coffee intends to take appropriate measures to defend against these malicious allegations, in order to protect shareholders' interests.
In response, the Swiss also fortunate short report on these allegations one by one explained.
For example, Swiss Fortunately, said the company's operational data are all critical real-time tracking, including the number of daily sales per store of goods, commodities and effective single mean sales price, and can be verified; moreover, we adhere to the company disclosed the effective sales price It is true and accurate, and can be verified through the company's internal systems. Rui Xing said, confirming the company to disclose advertising costs to be true and accurate ......
Two months later look at this response, all from the official denied all more like a show, and those who try to prove innocence from the argument, began to show the cruel ironies.
Eventually, Rui Fortunately, he hit his face, put his weight completely exposed in the spotlight capital.