00:00 This is why you should always do your own research before investing in stocks.
00:03 At its height in the 2010s, Starbucks was opening two stores every single day in China.
00:07 People saw the potential that the coffee industry had in China and several new Chinese-based
00:11 coffee companies started.
00:12 And one of them went by the name of Luckin Coffee.
00:14 In just a few years, Luckin Coffee became the second largest coffee company in China
00:18 behind Starbucks, opening almost 3,000 stores.
00:21 They took this story to investors and were able to get listed on the Nasdaq Stock Exchange
00:25 in the US and were valued at $9 billion at their height.
00:27 But this is where it starts to get interesting.
00:29 At the same time, a short-selling firm called Muddy Waters tweeted a link to a report in
00:33 which the author stated that "They hired hundreds of people in China to collect over 10,000
00:37 hours of video surveillance and based on the foot traffic of those stores, they claimed
00:41 that Luckin Coffee was artificially inflating the revenue to investors by 88%.
00:45 Shortly after this, Luckin Coffee comes clean to investors and says that their COO fabricated
00:49 hundreds of millions of dollars in sales.
00:51 As you would expect, the stock crashed over 80% once this made the news."
00:55 So because of that...
