almost 4 years ago • 2 mins
Tesla’s stock price jolted up 5% on Friday after the electric carmaker published stronger quarterly production numbers than analysts had expected – while shares of US-listed but Chinese-based Luckin Coffee tumbled another 11% following Thursday’s 75% drop 🙀
Luckin’s caffeine-fueled growth recently saw it eclipse Starbucks’ Chinese store count in a fierce battle for upwardly mobile consumers’ adenosine receptors. Last May, the upstart bean brewer’s initial public offering saw it raise $560 million from investors at a $4 billion valuation – but while its share price rose, analysts questioned the viability of Luckin’s tech-style lossmaking.
Coronavirus concerns took the shine off the company’s stock in January – compounded by a prominent activist investor alleging accounting irregularities. And those warnings were vindicated on Thursday as Luckin revealed a senior executive had simply invented 40% of last year’s sales 🤭
Investors had also been worried that coronavirus would put a serious dent in another fast-growing company: Tesla. So they were delighted when the electricity magnate shared verifiably positive vehicle production and delivery figures that made for its best first quarter ever.
Luckin’s shocking revelations may cast aspersions on the more than 150 other Chinese businesses with shares on American markets, as well as some listed in Hong Kong; they’re certainly asking questions of the big banks who organise those listings. “Short sellers” like the investor who first called out Luckin often get a bad rep, but they put their money where their mouths are – and they may be worth listening to 👄
Investors should always be wary of buying into hype. Tesla has impressed of late – but with its “non-essential” factories shuttered and drivers locked down in the company’s spiritual and operational home of California, the rest of 2020 is unlikely to be so sparky. With oil prices also historically cheap – discouraging electric car sales – Tesla’s share price may still be fueled by too much sentiment. At least it’s not caffeine…
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