The fast lane to failure?

If bullshit were a beverage, Luckin Coffee would be a venti-sized, extra-foam, no-whip, caramel-drizzle frappuccino of deceit, served with a side of investor gullibility.

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👇 Today’s Briefing

• Story: Biggest Corporate Fraud in History? ☕️

• Insight: Grow Your Business Without Losing Your Morals ⚖️

• Action: Conduct a Personal Failure Audit 💣

THE STORY

Biggest Corporate Fraud in History? ☕️

Snapshot 📸 : Chinese startup Luckin Coffee's meteoric rise from 2017 ends in a spectacular 2020 crash, fueled by $310 million in fake revenue. Their ambitious plan to out-brew Starbucks proves that in business, you can't just fake it till you make it – especially when cooking the books.

It's 2017, and a new coffee startup is brewing up a storm in China. Luckin Coffee has a plan to take on the big dogs like Starbucks, and they're not afraid to play dirty. But there are a few problems with their recipe for success:

• They're inexperienced in a market dominated by established brands

• Their rapid expansion plans are as ambitious as a toddler's X-mas list

• And their financial reporting is about as transparent as a brick wall

Does Luckin take the time to build a solid foundation? Nope. Do they focus on creating a sustainable business model? Nope. Do they prioritize integrity and accountability? Nope, again…

Luckin started popping up locations left and right to compete with other global coffee brands. Investors are dazzled by the growth numbers. By 2019, Luckin is the second-largest coffee chain in China, with a valuation of over $4 billion. But behind the scenes, the company is shaky AF.

Here's a summary of this corporate fraud scandal:

• In January 2020, short-seller Muddy Waters published a report alleging Luckin Coffee had fabricated financial and operating numbers.

• An internal investigation revealed that Luckin's COO and other employees had fabricated sales transactions.

• The fraud inflated Luckin's reported revenue by approximately $310 million in 2019.

• False transactions were created using individual accounts and third-party companies to boost sales data.

• Luckin overstated its net revenue by 95% and its expenses by over 100% for the second quarter of 2019.

• The company admitted to the fraud in April 2020, leading to a steep drop in its stock price.

• Luckin was delisted from the Nasdaq stock exchange in June 2020.

• The company agreed to pay a $180 million penalty to settle charges by the U.S. Securities and Exchange Commission.

• Several executives, including the chairman and CEO, were fired or resigned due to the scandal.

• In December 2020, Luckin filed for bankruptcy protection in the United States.

Luckin has been inflating its revenue by a whopping $310 million. When the truth comes out in April 2020, Luckin's stock price plummets and the company's reputation dissolves faster than instant coffee in hot water.

The lesson ? In each case, a lack of transparency, accountability, and integrity led to catastrophic consequences (though they do make for some juicy headlines).

Key takeaway: Stay vigilant and don't let hype and growth blind you to red flags. When it comes to corporate fraud, wake up and smell the bullshit!

INSIGHTS

Grow Your Business Without Losing Your Morals ⚖️

Growing too fast is like chugging a gallon of Viagra: it might seem like a good idea at first, but before you know it, you're in over your head and everything's gone to shit. Here’s two key aspects to remember:

1. Growth as a double-edged sword: While growth is essential for a company's success, it can also be a source of risk and instability if not managed properly.

• Starbucks experienced growing pains in the early 2000s when its rapid expansion led to a decline customer satisfaction.

• Groupon's meteoric rise was followed by a sharp decline as the company struggled to maintain profitability in changing conditions.

• WeWork's aggressive growth led to financial losses and ultimately forced the company to postpone its IPO and restructure its operations.

2. Sustainable growth as a balancing act: Hsieh's quote emphasizes the importance of finding the right balance between growth and stability.

• Amazon's success can be attributed to expansion while maintaining a focus on customer satisfaction and operational efficiency.

• Patagonia has grown steadily over the years by staying true to its core values of environmental sustainability and social responsibility.

• Costco has maintained a loyal customer base and strong financial performance by prioritizing value, quality, and customer service.

Hsieh's quote serves as a reminder that growth should never come at the expense of a company's core strengths and values.

TAKE ACTION

The John Doerr Way to Kick Ass & Take Names 🎯

OKRs (Objectives and Key Results), developed by John Doerr, are a goal-setting framework that defines ambitious objectives and measurable key results to track progress. Let’s OKR your business like a boss:

1. Set Objectives: Dream big, but keep it real. Pick 3 clear, concise, and ballsy goals that'll make your competition piss their pants.

2. Define Key Results: No need to be vague. Slap some numbers on those objectives to measure and then manage.

3. Align & Cascade: From the CEO to the intern fetching coffee, make sure OKRs trickle down like a well-oiled machine.

4. Track Progress: Keep tabs on your OKRs more obsessively than a stalker ex. Weekly check-ins are highly recommended.

5. Grade & Reflect: At quarter's end, it's time for the moment of truth. Score your OKRs from 0 to 1. If you're hitting 1.0 every time, you're not dreaming big enough.

Remember, OKRs aren't just another corporate circle jerk. Now go forth and OKR the living daylights out of your business!

Memes of the Week 🤣 

Bite-Sized Reads 📚

[Read] "To create fake holdings, Parmalat set up a network of offshore companies in tax havens…Cayman Islands and the British Virgin Islands.”

[Read] Fortune: “Luckin, the scandal-tainted Chinese coffee upstart, plots an improbable comeback from delisting and bankruptcy.”

[Read] RIP Tony: “Drug use, mental illness that led to Zappos CEO Tony Hsieh's death revealed in new book.”

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Publisher: Jordan Belfort

Editors in Chief: Brock Swinson and Davis Richardson

DISCLAIMER: None of this is financial advice. This newsletter is strictly for educational purposes and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.