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If there is no Cheng Biaojin, who was killed halfway through the muddy water company, the bullet of Ruixing Coffee Capital Scam may have to fly for a while.

Since the establishment of Ruixing, it has been growing at an alarming rate. After officially starting operations in January 2018, it opened 2,370 stores in just 12 months, and the speed of new stores even exceeded Starbucks. Just 18 months after its establishment, it was fabulously listed on the US stock market Nasdaq. After 8 months, its market value doubled to US $ 12 billion, which shocked and satisfied many US investors.

However, everything ends on the day after April Fools’ Day. On April 2, two months after the 89-page short report in muddy water became public, Ruixing Coffee, which was listed for nearly a year in the US stock market, changed its attitude of resolutely denying financial fraud before submitting it to the US Securities and Exchange Commission. The document admits that during the second quarter to the fourth quarter of 2019, the transaction volume of RMB 2.2 billion was increased in a vacuum, which was exposed.

The capital myth came to an abrupt end. As soon as the news came out, its stock price started to melt several times, plunging 75% overnight.

Now that some executives have been fired by the board of directors, the Nasdaq Exchange said it has made a delisting decision and left the property for a while.

Reviewing the short-selling report of Muddy Water, respectively demonstrating Ruixing ’s falsified financial and operational data, as well as the inherent defects of its business model; after the incident broke out, investigators also continued to investigate Ruixing ’s financial data. However, no one has given a definite statement about how the 2.2 billion yuan, which is almost equivalent to Ruixing’s quarterly revenue figures, was blown up and how it was hidden.

Now, some insiders have finally surfaced.

We saw that this year the scam had begun in a magnificent year before Ruixing landed on Nasdaq.

01 Voucher for flying in the sky

The Wall Street Journal disclosed the latest internal documents and public records showing that the flying coupons are a good shield for Ruixing.

The documents show that one month before the IPO, some employees of Ruixing began to design false transactions to boost sales data. These employees used their mobile phone numbers to register personal accounts and purchased a huge number of coffee vouchers. According to informed sources, sales of up to 200 to 300 million yuan (28 million to 42 million US dollars) are fabricated in this way.

Ruixing soon discovered that this trick seems to be more efficient for companies.

According to the internal records obtained by The Wall Street Journal, a new business of bulk sales of coffee vouchers for corporate customers at the end of May 2019 began to receive a large number of influx of orders.

According to the records, in addition to selling real vouchers to a small number of regular customers, including airlines and banks, Ruixing also purchases a large number of vouchers from some unknown companies scattered in cities across China. These companies buy vouchers repeatedly and in bulk, and the amount is huge.

Sometimes, Ruixing even receives a lot of orders during the night hours.

According to analysis, Ruixing sold a huge amount of vouchers in a similar way in 2019. Through this, Ruixing Coffee was able to record company sales of more than 1.5 billion yuan (approximately US $ 210 million), far exceeding real sales during the same period Happening.

In addition to the inflated order, Ruixing also inflated the payment record-another place that Ruixing discovered that it can be used for hands and feet to pay for raw materials. Other internal documents showThe Chinese regulator recently reviewed the Ruixing system and found that there are problems with supplier payments of more than 1 billion yuan (about 140 million U.S. dollars).

According to the record, the $ 1.4 billion payment was handled by a purchasing employee named Liang Hui, who paid the dozens of companies listed in their records. Human resources and other services. However, people familiar with the situation revealed that all these data, including this employee, are fictitious, and many of the companies recorded were not even incorporated until April and May 2019.

It is reported that these payments were approved by Rui Zhi CEO Qian Zhiya, and sometimes she took the initiative to ask about the progress of the payment process. At the time, CFO Reinout Schakel did not manage Ruixing’s finance and treasury departments, so these payments bypassed him. Schakel declined to comment.

02 Lu Zhengyao ’s network

In fact, if you check the registration records of the company that purchased the voucher and other companies that repeatedly received payment from the supplier, you will find that many companies have cooperated with Ruixing, Lu Zhengyao, or Shenzhou Car Rental and Shenzhou UCAR that were previously created by Lu Zhengyao. The company is connected.

As the chairman and largest shareholder of Ruixing Coffee, Lu Zhengyao is also the chief trader of the China Department. The senior executives of Ruixing Coffee, including CEO Qian Zhiya and CMO Yang Fei, are from the China Department. Ruixing Coffee is an important member of the Shenzhou Department under Lu Zhengyao.

From trial operation to landing on the New Third Board, it took only 18 months before and after China Automobile, but it has gained more than 40 billion yuan in market value, and then continued to increase its asset scale through acquisitions. Rui Xing’s money-selling and marketing methodology is inherited from the Shenzhou Department.

Not only that, the China Department has accumulated a large number of networks for Ruixing ’s capital scams.

Internal documents show that some of the companies that conduct false transactions are those of Lu Zhengyao ’s relatives and friends, and anotherThese were originally branch offices of Shenzhou Rent-a-Car or Shenzhou Youqi. The office address and contact phone number are the same. It is Ruixing’s own to have an email address.

For example, a company called “Qingdao Zhixuan Business Consulting Co., Ltd.” in Shandong Province, China, purchased a lucky coupon worth 960,000 yuan with only one order. From May to November last year, this company alone made more than 100 purchases of similar size.

The company registration records in mainland China and Hong Kong show that the company has inextricably linked with a relative of Lu Zhengyao, an executive of UCAR, and an executive of Ruixing, The phone and email are also the same as a branch of Shenzhou UCAR.

Another example, a company called “Dart Infitech (Beijing) Data Technology Development Co., Ltd.” often buys Ruixing coffee vouchers in large quantities. This company shares the same phone number with a branch of UCAR and the predecessor of UCAR. The other buyer named “Zhengzhe International Trading (Xiamen) Co., Ltd.” is a raw material supplier of Ruixing.

In this way, the vouchers sold by Ruixing Coffee to companies related to Lu Zhengyao can be exchanged for tens of millions of cups of coffee, pushing its book operating income to a level far exceeding the actual income.

03 suspicious financial statements

In fact, a huge increase of 2.2 billion yuan has been seen in the financial report.

According to historical financial reports, Ruixing has not generated positive operating cash flow in one quarter; moreover, investment cash flow is also a huge negative number in most cases. The company relies almost exclusively on external financing to fill the hole, with a financing amount of approximately 9.5 billion yuan from 2018 to the third quarter of 2019.

But if Ruixing can still tell a story about it, saying that he is temporarily sacrificing cash flow to seek large-scale expansion, then his single store revenue data, especially inventory data, is an undeniable wealth.Fraudulent evidence.

Some analysts compared the single-store revenues it disclosed with Starbucks. Starbucks ’single store revenue in the Asia Pacific region is about 990,000 yuan per quarter, with little fluctuation. In the third quarter of 2019, Ruixing Coffee’s single-store revenue is about 42% of Starbucks. Based on product prices, this means that Ruixing Coffee’s single-store product sales cups must reach 1.2 times that of Starbucks. However, from the point of view of its much smaller store area than Starbucks, this is almost impossible.

In addition, analysts say that as a retail company, inventory is a very important indicator for Ruixing Coffee. In the second quarter of 2019, the company’s revenue increased by 90% month-on-month, but inventory only increased by 23%; more surprisingly, in the third quarter of 2019, the company’s revenue increased by 70% month-on-month, but the total inventory fell! The company’s inventory turnover days also fell from 55 days in the first quarter of 2019 to 28 days in the third quarter.

If a retail company wants to double its quarterly revenue growth quarter-on-quarter, its inventory will hardly increase; or if the number of stores continues to expand and the product category continues to increase, the inventory days will drop by half, which is almost a night. Tan.

Informed sources revealed that the US Securities and Exchange Commission is one of the agencies investigating Ruixing. In April this year, the agency once again warned about the risks of investing in companies in China and other emerging markets. The State Administration of Market Supervision, China’s highest industrial and commercial regulatory agency, conducted a surprise inspection of Ruixing’s headquarters in Xiamen and recorded it.

Recently, Ruixing released CEO Qian Zhiya and Chief Operating Officer Liu Jian on May 11, and six other employees were suspended or on leave. On May 20, Lu Zhengyao apologized in a public statement.

Although before the announcement, Nasdaq indicated that it had made the decision that Luckin Coffee should be delisted, last week it allowed its American Depositary Shares (ADR) to resume trading after six weeks of suspension. After the resumption of trading, the stock continued to plunge and closed at US $ 2.16 as of Friday, far below the US $ 50 in January.