Chinese cafe chain Luckin Coffee lost around 75.6 per cent of its stock value as of Friday after announcing an internal investigation into alleged fake sales figures.
In a statement published on its website on Thursday night, the company said between the second and fourth quarter of 2019, its sales figures could have been inflated by up to 2.2 billion yuan ($310.6 million), reports Efe news.
The firm, whose shares had closed at New York's Nasdaq stock exchange at $26.2 per share on Wednesday, lost three-quarters of its stock value on Thursday, ending at $6.4 per share.
"The company's Board of Directors has formed a special committee to oversee an internal investigation," said the firm, adding that it was assessing "the overall financial impact of the misconduct on its financial statements".
"Investors should no longer rely upon the company's previous financial statements and earnings releases for the nine months ended September 30, 2019, and the two quarters starting April 1, 2019, and ended September 30, 2019," the statement said.
Chief Operating Officer responsible for the fake figures
The investigation, still in its initial phase, has pointed to Luckin's chief operating officer, Jian Lu, and people reporting to him as being responsible for the fudged figures.
Lu and other employees implicated in the misconduct have been suspended and the company has vowed to take "all appropriate actions, including legal actions" against those involved.
The stock crash marks the chain's lowest stock value since it's listing in May 2019 with the opening share price rising above $25.
Compared to its best-ever performance in the stock market, Luckin has now lost 87 percent of its total stock value.
The company, headquartered in the southeastern city of Xiamen, was founded towards the end of 2017 and has opened around 3,500 establishments across the world since then.
Luckin's stated aim was to get the better of Starbucks in China, a claim which led to the US cafe giant suing it in courts, alleging that it was trying to monopolize the growing cafe sector in the country.
The emerging chain's sales strategy involved offering heavy discounts to obtain a wide client base, and despite registering losses worth 857 million yuan in 2018, it had claimed that the "scale and speed" of growth were more important than the profits.