Can I Buy you a cup of Coffee?

The bitter taste of the Luckin scandal lingers in the mouths of American investors, yet this is a stock that is worth one tenth of its previous valuation. After a slap on the wrist from China, it's only up from here for Luckin stock, $LKNCY.

While the scandal lead to the series of China-focused legislation designed to protect investors from future accounting malefactions of such magnitude, we know many Chinese companies are sketchy. We also know they are growingly wildly with a state-backed plan to go global.

When China clones an American brand, they mean serious business. The controversial, downtrodden Chinese coffeehouse operator is probably one of the best speculative investments out there today in October, 2020. This is because in China the coronavirus Second Wave won't be as serious and the GDP there rebounds much faster than in other parts of the world.

Coffee might not be all that popular in China, but this is slowly changing. The Chinese Consumer really is king. Also let's think about the leadership here. Board appointments usually don’t move stocks. But in Luckin’s case, Shao’s reappointment was positive because it indicates the company, once plagued by corruption at the top, is prioritizing independence on its board.

Luckin's stock is up 20% today. In July, Luckin changed its Board of Directors and appointed a new Chairman to the Board. It added two independent directors following the extraordinary general meeting of shareholders on July 5. The stock peaked at $50.00 at the beginning of the year and there were times lately that it was as low as the 2$ range. Betting against China is a bit comical if you are an investor today.

Can Luckin regain its credibility problem? Mr. Jinyi Guo, formerly the Acting Chief Executive Officer, will become CEO and Chairman of the company. The executive changes bring hope for needed changes in the business. The new executives have experience in the relevant areas as venture capital. Mr. Yang Cha acted as a venture partner for several venture capitals. He worked at non-profit organizations regulated by authorities in the United States.

Speaking of the scandal, China’s finance ministry recently fined the coffee company nearly $9 million. All things considered, that’s a minor punishment, given the gravity of the situation. But the coast is clear for the catalyst to re-appear again, China doesn't let a Nio or a Luckin fail, no matter the cost. With many IPOs returning home, and huge IPOs like Ant Group coming, you can see how China is rising to be the next corporate and economic super-power easily within our lifetimes.

No one would believe Lucking Coffee’s coming back to NASDAQ after being sued and facing financial difficulties. Funny how things work though when you have a powerful state behind you. In that light Luckin it's speculative, it's a sure bet. China's regulations are of course laughable. So along with 43 fraud-friendly firms that abetted Luckin in the scandal, got hit with a 61 million yuan fine ($8.98 million). That’s right, only a little under $9 million spread across all these companies for a fraud that, according to Luckin’s own internal investigation, inflated reported revenue by 2.12 billion yuan, or around $309 million. China is pretty corrupt, but that doesn't mean Western investors can't let them be their sugar-daddy.

We live in a crazy world where pink slip penny stocks are usually a no-go. Let's be honest here though, any whiff of somewhat positive news moves Luckin’s shares. When I called Nio's stock it was $3, now it's $20, and I expect much the same to happen to Luckin in the months and years ahead. After the pandemic, Luckin Coffee’s stocks will surely be hot again unless the next wave of lawsuits come again. Throwing $500 dollars at this and waiting 2 years isn't rocket science, but it is likely to give you a positive reward. 

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