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The last time hedge-fund manager Sean Ma took a good luck at China’s biggest coffee chain, he found hundreds of millions of dollars in phony sales. It seemed that, in its effort to become the “Dunkin’ of China,” it had played a bit fast and loose with things like revenue and expenses to show greater progress toward surpassing Starbucks than had, in fact, been made.

Presumably, Ma’s Snow Lake Capital made a killing on its short of Luckin Coffee, especially after Carson Block broadcast Ma’s anonymous report on Luckin to the world. Now, it plans to do so on Luckin’s “miracle” recovery.

“I never would have thought the company could come back. Many nearly impossible things happened,” Mr. Ma said. His firm on Monday released a slide presentation and 81-page report making a bullish investment case for five-year-old Luckin, which has revamped its business and corporate governance over the past two-plus years…. Luckin’s shares have gained more than 80% this year, giving the company a valuation of about $4.4 billion. The company has resumed its expansion in China, opening more stores, and grown sales by selling a range of coffee-based beverages that appeal more to Chinese consumers’ tastes. It reported $107 million in net profit in 2021, its first-ever annual profit.

“I’m buying Luckin because I think it is only a matter of time that the company overtakes Starbucks in China,” Mr. Ma said…. “I’m telling the world this is a good company. I have vetted it. I have done my homework,” he added.

And all it took was a raft of fines and firings, a global pandemic and a growing trade/cold war with the United States.

Hedge-Fund Manager Who Helped Expose Luckin Coffee’s Fraud Bets on Chinese Chain’s Comeback [WSJ]

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