Luckin Coffee did not have a good day yesterday…

First, they announced that an internal investigation had revealed that hundreds of millions of dollars of sales last year had been fabricated, and immediately after their share price dropped around 80%.

The company which is seen as the Chinese competitor to Starbucks informed investors that they cannot look back on previously recorded financial statements as evidence of their rapid growth.

Their COO has been suspended after the investigation.

The revelation has been a massive shock to the company who had been flying high after being listed on Wall Street less than a year ago.

It has been reported that the fake sales reports had been down to Luckins COO and other members of his team and they have been accused of fabricating transactions.

As well as fabricating transactions, it was also reported that expense and cost reports had been inflated.

Investors had seen the shares surge higher, moving from $13 up to $27 shortly after its initial listing.

The company was able to grow and expand rapidly and undercut its major rival, Starbucks. They had doubled the number of outlets they had within a year and sold bonds for further investment.

However, they remained unprofitable and recorded a loss of $247million in 2019.

In January their shares surged even higher, hitting the $50 but it has been downhill since then.

The coronavirus outbreak had seen their share price drop down to $25, and after the announcement yesterday it plummeted all the way down to $4.91, a fall of over 80%.

The shares did recover slightly and are now trading at $6.35, but it's hard to see a quick turnaround in their fortunes for now.