Luckin Coffee's attempted takedown of Starbucks is WILD

Before I start the analysis, I want to tell a story.

The year is 2019, I'm a regular individual investor with a day job (still am). I enjoy reading "Motley Fool", but am annoyed with the constant click-baity "5 can't miss stocks of the century" posts.

They finally got me. For some reason, I was really curious at a "Can't Miss Stock" they recommended, so I joined their premium program and saw the name: Luckin Coffee.

I'm a big believer in investing in what you know. Since I have never been to China, I wasn't too interested in a Chinese coffee company, so I decided not to take a position.

Oooh boy, I'm glad I didn't take a position.

In 2020, the company was found guilty of some gnarly SEC violations (fabricating sales figures) and was delisted from NASDAQ. Many investors experienced total, or near-total loss.

This taught me three lessons:

• Be wary of Chinese stocks (this isn't Sinophobic)

• Never blindly follow stock tips

• Invest in what you know

But! the company is back. They fired all employees and executives that participated in the fraud.

And they're trying to move into the US market. They recently opened up 5 coffee shops in NYC.

Luckin's key selling point:

• Mobile only orders (cuts down wait times)

• Shower the user with discount codes

• Average coffee costs ~$2.00

The company is currently trading on the OTC markets since it was delisted from NASDAQ after the fraud scandal. Berstein did analysis and believes the company's running a loss with their NYC operations.

All in all, I'm not to worried about Luckin taking over Starbucks. They are very different businesses, and I'm not sure that the US will adopt the mobile only experience.

I highly recommend watching this 10 minute video from CNBC on the matter: