Snow Lake Capital, who is rumored to be behind Luckin Coffee's fraud, increased its investment in Ruixing shares.

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On the evening of November 7, Ma Ziming, founder of Xuehu Capital, said on the platform of a financial website: Luckin Coffee's rebirth of desire is a miracle in China's business history! A presentation and an 81-page bullish report are attached, and his bullish position is emphasized.

Over the past two years, Luckin Coffee has reformed his business and corporate governance, and it is only a matter of time before Luckin Coffee surpasses Starbucks.

In early 2020, when Luckin Coffee, founded and listed by Lu Zhengyao, was exposed for financial fraud and delisted, Xuehu Capital was speculated by the market and the media as the behind-the-scenes trader exposing Luckin Coffee's financial fraud and short-selling documents.

Various data on an anonymous report on Luckin Coffee suspected of financial fraud released by Muddy Waters Research, a well-known US short seller, led many media reports and market rumors at that time to point out that the anonymous report came from Snow Lake Capital.

Because at the beginning of Luckin Coffee's listing, Xuehu Capital first commissioned a consulting company to find professionals to discuss Luckin Coffee's business model, in order to find the existing problems. But Mr Ma did not comment on whether he was involved in the report or in any business investigation about Ruixing.

After the incident, Lucky's investor, Dawei Capital, joined hands with the new management team, expelled the original management with Lu Zhengyao as the core, carried out a thorough reorganization of Luckin Coffee, and Luckin Coffee's performance also grew rapidly. According to Luckin Coffee's financial report, revenue in 2021 increased by nearly 100% to 7.965 billion yuan, while Luckin Coffee's revenue in the first half of 2022 reached 5.7 billion yuan, an increase of about 80% over the same period last year.

Snow Lake Capital began studying an online consumer survey involving more than 100000 lucky customers at the beginning of this year, and Ma Ziming said he did not pass Ruixinggou during the preparation of the report. He believes that based on the current growth of Lucky, its net profit will reach 2.8 billion yuan in 2024, when the market profit will be 35 times, which is equivalent to Snow Lake's valuation of Starbucks in China.

Dawei Capital completely eliminated the influence of Lu Zhengyao in Ruixing, and the reorganized new management team focused on business foundation and profitability. The new management team does not pursue store expansion and "new retail" models, but focuses on business fundamentals and profitability.

In response, Ma Ziming mentioned in an interview with the Wall Street Journal that Snow Lake Capital had bought a minority stake in Luckin Coffee, which now accounts for about 15 per cent of Snow Lake assets under management (but there are no specific figures) and bet that its valuation will soar. As long as Lucky can keep growing, it plans to hold shares in the company for "several years". In addition to Ruixing's growth prospects, he is also very optimistic about the possibility of its re-listing in the United States.

Ma Ziming is so optimistic about Luckin Coffee. One is that under the influence of the epidemic, consumers' coffee consumption habits have been changed. The more consumers choose takeout / packing, the demand for space in coffee shops is decreasing, and coffee shops such as Starbucks that provide a third space type are also affected. But Luckin Coffee, who has always focused on buy-and-go (pick-up) stores, has won more opportunities.

Another point is that Luckin Coffee is well aware of the needs of consumers in China's local market, and continues to introduce beverage coffee, as well as new products.

I have to say, Ruixing's performance over the past two years is indeed very outstanding, not only through actions to regain the confidence of investors, but also to grasp the needs of local consumer products.

Photo Source: Internet