>>> The FDA-approved Drug Ivermectin inhibits the replication of SARS-CoV-2 in v

The FDA-approved Drug Ivermectin inhibits the replication of SARS-CoV-2 in vitro

Australian scientists find that ivermectin (common wormer) used in the laboratory in vitro kills coronavirus within 48-hours; next step will be human trials


Highlights
• Ivermectin is an inhibitor of the COVID-19 causative virus (SARS-CoV-2) in vitro.

• A single treatment able to effect ∼5000-fold reduction in virus at 48h in cell culture.

• Ivermectin is FDA-approved for parasitic infections, and therefore has a potential for repurposing.

• Ivermectin is widely available, due to its inclusion on the WHO model list of essential medicines.

Full report attached

>>> Barron’s Weekend Summary

Barron’s Weekend Summary: What is happening in New York City during the coronavirus pandemic is indicative of how the US economy will fare through the business shutdown and beyond; The pandemic is validating the growing embrace of cloud computing
* Cover story: In one month, New York City—responsible for nearly on tenth of overall US economic output—has become the epicenter of the novel coronavirus outbreak in the US, and what’s happening there is informative for other metropolitan areas bracing for the stealthily spreading virus and indicative of how the US economy will fare through the widespread business shutdown and beyond.
* Tech Trader: Positive on Comcast, VZ: With Americans hunkering down in their homes amid the pandemic, Internet use is surging—but the good news is that networks are handling the traffic spikes without any major hiccups; One takeaway from the current situation is that it offers clear validation of the corporate world’s growing practice of moving computing to the cloud.
* Trader: “Investors should continue looking for opportunities in individual stocks, with less worry about the kind of no-safe-haven, sea-of-red days when no company’s shares are spared from steep losses”; For investors seeking exposure to oil and gas, CVX is the most attractive stock on a relative basis—its balance sheet is strong enough to protect its 7% dividend yield and the company has made commitments to slow drilling and preserve cash.
* Features: 1) If ever there were a prime time for active funds, this is it: the first bear market since the financial crisis, soaring volatility, and a chance for stock and bond pickers to prove they can tiptoe through the minefields, adding value over unmanaged index funds that mirror the market; 2) With the global economy on shutdown, advertising is disappearing across the media landscape, mainly because even the most prominent ad buyers—airlines, automakers, hotel chains, etc.—lack reasons, and often the means, to buy ads; 3) “New York City, as the nation’s epicenter of the Covid-19 pandemic, is battling an unprecedented health crisis. It is also grappling with a rapid economic slowdown that is undermining hard-won gains in its fiscal health that have been achieved since the financial crisis of the 1970s”; 4) New York has weathered crises before, from the dot-com bust and 9/11 to the financial crisis—but this time, banks are part of the solution, not the problem, because they’re the conduits by which billions of dollars will be funneled to small businesses across America; 5) Hospitals across the country are facing major challenges as the coronavirus spreads—the particular nature of the disease and the unusual length of time it takes to get really sick are compounding the growing problem of hospital shortages; 6) With tens of millions of people losing jobs in the US, companies are looking beyond shareholders, a move that’s likely to accelerate the “stakeholder capitalism” trend in which employees, suppliers, customers, and communities are given equal consideration to shareholders.
* Interview: Eli Casdin, founder and chief investment officer of Casdin Capital, a New York-based hedge fund specializing in life-sciences investments, talks about biotech, and why investors should recognize that an industry with a lot of growth ahead isn’t going to sustain disruption in the same way that much of the legacy economy will.
* Mutual Funds Quarterly: 1) Positive on RNWOX, POLRX, RYSEX, IVIOX, JENSX: Story says these are the five best mutual funds to own now, because they focus on companies that have the cash to survive the coronavirus downturn; 2) Bond mutual and exchange-traded funds can react very differently in times of market volatility, even when they own the same securities, creating potential problems for investors; 3) Extreme drops in the stock market during the coronavirus pandemic have shown investors how well their portfolios can withstand periods of market volatility; 4) Negative interest rates have been the norm in many developed nations for more than a decade, but the notion that US interest rates could drop below zero had seemed unfathomable—until recently; 5) Most bond funds have taken a hit recently, and while it’s probably best for bond investors to avoid major changes to their portfolios, there are several strategies they can put to work now to mitigate the damage.
* European Trader: Positive on Morrisons: The British supermarket chain is doing well, and the sector becomes a defensive play, as people stockpile during the pandemic; the company stands out from rivals because of its vertical supply chain—it owns many of the farms and processing facilities that supply its food.
* Emerging Markets: Mounting emerging market corporate debt has looked like an accident waiting to happen for some time, but some fund managers say the coronavirus’ real consequences in defaults and downgrades may prove more like a fender bender, leaving room for a lucrative rebound.
* Commodities: “Corn prices could drop to their lowest levels in more than a decade as coronavirus-related weakness in demand for gasoline pushes the cost of ethanol toward record lows.”
* Streetwise: Retail investors should consider a barbell strategy, says Chuck Grom of Gordon Haskett, with stores that can prosper during a downturn on one end, and ones that can bounce back during a recovery on the other—of the latter type, his favorites include WSM, W, and TSCO.

FT : Regulators free up $500bn capital for lenders to fight virus storm

Regulators free up $500bn capital for lenders to fight virus storm
Moves by central banks around the world designed to add $5tn in extra credit for the real economy

Financial regulators have freed up about $500bn of capital for lenders around the world to help them absorb the impact of the Covid-19 pandemic, according to calculations by the Financial Times.

By relaxing capital requirements in the past few weeks, central bankers have aimed to keep credit flowing to businesses and households and mitigate the economic turmoil caused by mass quarantines put in place to slow the spread of the virus.

Data released last week showed the global economy is on track for its sharpest slowdown since the Great Depression, while millions of people around the world have lost their jobs. 

The freed-up capital provides lenders with the capacity to make an extra $5tn of loans globally. 

The FT has counted $492bn in capital relief by central banks and regulators from Washington to Hong Kong, which has mostly come from cutting extra capital buffers that were designed to strengthen lenders’ balance sheets after the 2008 crisis. 

Some regulators have ordered banks to conserve capital by freezing dividends and reining in bonuses, while others have postponed the introduction of tougher capitalisation rules or provided temporary exemptions in the calculation of capital requirements. 

The moves highlight how policymakers hope that banks will play a more constructive role than in the 2008 financial crisis, when they were widely blamed for being the source of many problems.

This time they are seen as a vital “transmission mechanism” for the trillions of dollars in aid that governments have unleashed to save the global economy from collapse.

“The buffers were built up in order to be released, so this is a textbook way to use them,” said Nicolas Véron, a senior fellow at the Bruegel think-tank and the Peterson Institute for International Economics.

He added: “In a way the banking sector has suddenly been transformed from a nominally capitalist enterprise into effectively a state entity. It’s temporary, but it is significant.”

While central bankers are confident that the banking system is in much better shape than the 2008 crisis, they are worried that the economic downturn could be amplified if there were to be a pullback from lending to companies and individuals to conserve capital.

Bank capital is made up of shareholders’ equity and retained earnings and is used to absorb losses while staying solvent, making it a crucial measure of a bank’s financial strength.

By allowing banks to operate with lower levels of capital, regulators are boosting their firepower to absorb higher demand for loans as well as rising customer defaults and a deterioration in credit quality in their loan books. 

“The key dynamic for banks in this coronavirus crisis is duration,” said Joseph Dickerson, banking analyst at Jefferies. “It is unlikely that any banks will need to raise more capital from investors if it is resolved by the summer. But if it drags on to the autumn that is going to be a bigger problem.”


Apart from freeing up capital, central banks have supported lenders by injecting vast amounts of ultra-cheap loans into the banking system and lowering the amount of reserves or liquid assets they must hold.

Anat Admati, professor of finance at Stanford University, said banks should “conserve cash every way you can”, including by “stopping dividends and share buybacks”. She added: “I would not frame this step as a change in requirement but more as forbearance . . . conceptually it means you are not in compliance but I am not enforcing at the moment, but it means extra vigilance on the part of regulators.”

The biggest chunk of capital relief has come from the European Central Bank, which last month freed up €120bn at the 117 eurozone banks it supervises by allowing them to eat into various buffers while preserving a further €30bn by telling them to freeze dividend payments.

Other eurozone countries, such as Germany, France and the Netherlands, have gone beyond the measures announced by the ECB, by rolling back the extra “rainy day” requirements — known as countercyclical capital buffers — that they imposed at a national level and giving their country’s lenders extra flexibility on other buffers.

Several other national regulators have unveiled measures to free up tens of billions of dollars in capital for the banks they supervise, including the US Federal Reserve, the Bank of England, the Hong Kong Monetary Authority, the Central Bank of the UAE, the Australian Prudential Regulation Authority and the Bank of Canada.

Recent regulatory moves have released the equivalent of more than a quarter of the €1.78tn extra capital that was added to the biggest banks’ balance sheets between mid-2011 and the end of 2018 to comply with tougher rules introduced after the 2008 financial crisis. 

The world’s 106 biggest international banks increased their common equity tier one capital — the mostly closely watched measure for regulators — from €1.95tn in mid-2011 to €3.72tn in December 2018, according to the Bank for International Settlements. 

FT : Oil majors raise $32bn of debt to weather crisis

Oil majors raise $32bn of debt to weather crisis
ExxonMobil, Royal Dutch Shell, BP and Total among those to tap markets

The world’s biggest oil companies have raised debt worth more than $32bn in recent weeks to build up war chests to manage the financial fallout of the coronavirus outbreak while preserving shareholder payouts.

Companies that have tapped the bond market since mid-March include ExxonMobil of the US, Royal Dutch Shell, UK-based BP, Norway’s Equinor and France’s Total, raising debt in euros and dollars.

Oil and gas companies are pulling on every financial lever possible before having to cut their dividends. They are curbing capital spending by billions of dollars, suspending share buyback programmes, reducing costs and delaying the approval of projects.

Global oil demand has collapsed amid widespread lockdowns and travel bans. The drop in consumption has coincided with a Saudi Arabia-led price war that could see millions of barrels a day extra unleashed on to the oil market.

The drop in Brent crude — the international oil benchmark fell last week to the lowest level since 2002 — has caused turmoil for energy companies whose share prices have also taken a hit.

Brendon Moran, a senior energy banker at Société Générale said: “The playbook is the same as previous crises: those that can get out into the bond market are doing it. It secures liquidity but it also demonstrates that they have access to funding.”

Shell this week raised €3bn and $3.75bn, while BP tapped the market for €3.25bn and $3.25bn. Total and Equinor raised debt of €3bn and $5bn respectively. OMV of Austria raised €1.75bn. This followed a move by Exxon to raise $8.5bn a few weeks earlier.

For some companies, such as Shell and BP, the bond issuance comes on top of securing new multibillion-dollar credit facilities.

While some smaller companies and independent companies have already cut their dividend as they come under financial pressure, major energy groups are treating this as a last resort.

Many are aware that the payouts are one of the few reasons some investors hold the shares, as pressure builds on investors to move away from carbon-intensive industries.

Before the coronavirus outbreak, oil and gas companies were already facing challenges. They had promised to keep shareholder distributions intact despite the macroeconomic uncertainty, maintain revenues from fossil fuel businesses and invest in lower carbon energy.

Analysts have said that while existing payouts from international energy majors were generally safe for now, the return of scrip dividends could happen, referring to the option for investors to receive additional shares instead of cash payments.

WSJ : Why We Don’t Know How Many Americans Are Infected With Coronavirus—and Mig

Why We Don’t Know How Many Americans Are Infected With Coronavirus—and Might Never Know
Sparse testing is just one reason the official tally is far too low, but the numbers will get more reliable over time

The number of known infections with the new coronavirus has grown rapidly in the U.S., with more than 270,000 cases as of Friday. More than 7,000 have died. But there are all kinds of holes in those numbers.

People who got sick—or died—before testing was widely available don’t show up in the tallies. Even now, many people who want to get tested can’t, and some who could get tested choose not to. Some people are tested more than once. That undercount is problematic because it slows policy makers and hampers the public from understanding the full portrait of the epidemic.
From the time of infection, a patient can spend days without symptoms, more time feeling early symptoms and even more time waiting to get tested and then finally getting results.

Positive test counts are always behind the number of actual cases of Covid-19, the disease caused by the virus—often by a week to a month. Severe cases are the most likely to get tested.

Without widespread testing, health officials don’t have enough information to fully answer key questions, such as how many people are infected or the typical transmission rate per person. Hospitals can be blind to the oncoming wave of patients because many people remain untested until they appear in an emergency room.

The picture becomes a little clearer when states report the number of tests that come back negative, in addition to the positive cases, revealing the total number of tests that have been analyzed.

Missing cases can lead to skewed death rates. When countries test only their sickest patients, the death rate can appear extraordinarily high. For instance, Italy, which has rationed tests, had a mortality rate above 12% as of April 3, far above the global average, according to data compiled by Johns Hopkins University.

Further compounding confusion: Italy hasn’t been counting people who died at home. As a result, the chart below, which reflects the official tally of Covid-19 fatalities in Italy, should come with an asterisk to reflect that many more people likely died from it.

Because deaths from Covid-19 are far more likely to be reported than the much greater number of those who got the disease, some academics have tried to work backward from deaths to estimate the volume of unreported cases.

Preliminary research by mathematical modelers in the Centre for the Mathematical Modelling of Infectious Diseases at the London School of Hygiene & Tropical Medicine found the U.S.’s case count likely represented just 14% to 19% of actual infections that produced symptoms. (By contrast, South Korea had identified between 53% and 90% of total cases in the country, the researchers said.)

Local governments vary widely in how they collect and disclose their testing results, which can affect statewide totals. For instance, most states report just positive or negative test results, while others also report tests for which results are pending.

There is also the issue of tests done by private laboratories, working under contracts with hospitals and local health departments. Some states don’t report them or do so inconsistently. Until that data is more complete, state comparisons will be impossible and national figures will be potentially misleading.

Experts say that the goal should be broad testing throughout the population to get an accurate picture of who is infected. Iceland has tested a broad cross-section of its population and found that middle-age people make up 40% of those testing positive. In the U.S., where early testing has focused on people who show symptoms, the age distribution has skewed toward older groups.

Even when tests are given, they may incorrectly identify infected patients as coronavirus-free. Experts have estimated that nearly one in three infected patients receives a false negative test result.

A study in China among patients with Covid-19 symptoms compared the results of lab tests with those of CT scans taken of their chests, which can detect signs of infection in the lungs.

The picture is expected to sharpen in the coming months. New types of antibody tests will allow researchers to determine how many people had Covid-19, even if they were asymptomatic or showed only mild symptoms.

In San Miguel County, Colo., best known for the resort town of Telluride, a local couple who own a medical-testing firm are paying for antibody blood tests of the entire population of 8,000. Such tests will give “us a way to look back and reconstruct the past outbreak,” said Natalie Dean, an assistant professor at the University of Florida’s Department of Biostatistics.
Having the total number of infections would allow officials to calculate the overall infection rate, and by subtraction, what share of the population remains uninfected and vulnerable. It would also allow a closer estimation of how many of those infected develop severe cases or die—information critical in planning for hospital capacity.

Still, clear answers will take years and require careful analysis of death certificates, hospital records and broad antibody testing of the entire population.

And even death certificates won’t reflect the larger toll of the pandemic, as some people who never contract the virus will still die from a failure to get adequate health care, such as those who couldn’t get lifesaving transplants.

WSJ : Supply-Chain Finance Is New Risk in Crisis

Supply-Chain Finance Is New Risk in Crisis
Experts say the economic slowdown could expose weak spots in the arrangements

A “sleeping risk” on the books of U.S. businesses could be awakened by the pandemic, as the sudden cash crunch exposes a hidden type of financing that makes balance sheets look better, credit-rating firms are warning.

The three biggest ratings firms each issued reports last month highlighting the dangers of supply-chain financing, a fast-growing, opaque technique for delaying payments to suppliers to improve cash flow.

S&P Global Inc. called supply-chain finance a “sleeping risk” that can “mask episodes of financial stress.” A prime concern is that the banks or other lenders may yank the financing from struggling companies, cutting off a source of cash at a time when it is desperately needed.

“If banks stop these facilities, it’s like cutting credit lines and we might see some companies run into heightened liquidity problems as a result,” said Frédéric Gits, a group credit officer at ratings firm Fitch Ratings.

Supply-chain financing has been around for decades but really took off after the financial crisis.

Using this financing, companies effectively borrow money to pay their bills, extending, say, 60-day payment terms to six months or more. It would be like taking a personal loan to pay a credit-card bill.

The arrangement gives companies flexibility with their cash for a low cost, but it can paint a rosy picture of the businesses’ liquidity because the deals effectively boost working capital but typically don’t count as borrowing. Instead the loans are treated as trade debt or accounts payable, and don’t need to be disclosed. “They remain under the radar until the company runs into problems,” said Mr. Gits of Fitch Ratings.

Supply-chain financing is the mirror image of factoring of receivables, where companies sell their accounts receivable at a discount to get cash faster.

“Buyers benefit from…extended payment terms and no additional bank debt,” according to a video by Bank of America Corp. promoting its supply-chain finance business. “Think of what could be done with this extra cash.”

A spokesman for Bank of America said it has “received consistent positive feedback from both suppliers and buyers on the benefits of our supply chain financing offering.”

Coffee and soda giant Keurig Dr Pepper Inc. used several banks to defer payment to suppliers worth $2.1 billion as of the end of last year, up from $1.4 billion a year earlier, according to a securities filing. The company’s payment terms range up to 360 days, which it said in a filing was “customary within the coffee industry.”

Ozan Dokmecioglu, Keurig’s chief financial officer, said on an investor call this week the company has “ample unused credit capacity and no liquidity issues or concerns whatsoever.”

The lack of reporting makes it impossible to know the exact scale of the lending, but estimates put it at hundreds of billions of dollars globally. Sectors where it is widely used include consumer packaged goods, telecommunications, chemicals, retail and aerospace, according to Fitch.

Swiss bank Credit Suisse Group AG , which has four funds that invest in supply-chain finance, said it is a “rapidly developing industry, with [a potential market of] $2 trillion in financeable payables world-wide.”

These financing arrangements have grown in importance during the current cash crunch. The risk is that if banks stop providing the cash to companies, it would force them to pay their bills much more quickly at the worst possible time.

While the money keeps flowing, companies can get cash to their suppliers quickly while waiting for their own cash flow to rebound. Citigroup Inc. said some clients may use supply-chain financing to pay even more suppliers.

“In the last couple of weeks, we are seeing companies looking at supply-chain finance to see how they can help their small suppliers and asking if this can be a tool to inject some liquidity,” said John Monaghan, global head of supply-chain finance at Citigroup.

But the lack of transparency is a risk. Supply-chain finance was a “key contributor” to the collapse in 2018 of U.K. firm Carillion PLC, according to Fitch. Carillion was a big U.K. government contractor that imploded after its losses soared. Few investors realized Carillion had £400 million to £500 Million ($491 million to $613 million) of supply-chain finance obligations that it reported as “other payables,” dwarfing its reported net debt of £219 million, Fitch said.

The $2 trillion stimulus package Congress passed last week is designed to help stave off similar collapses. The unprecedented measure includes hundreds of billions of dollars in loans for companies, throwing a potential lifeline to firms facing cash-flow crisis.

That could ease the financial pressure on pandemic-affected companies that use supply-chain finance. For example, the package will make billions available for Boeing Co. and its suppliers.

A spokesman for Boeing, which doesn’t disclose any supply-chain finance arrangement in its securities filings, said in a statement the company gives suppliers the option of using its supply-chain financing arrangements to manage their operating cash flow.

David Gonzales, a senior accounting analyst at ratings firm Moody’s Corp. said these lending programs typically run for up to a year, so it will take some time before it is clear whether they will be renewed. “There’s a bit of a runway until things start to really turn sour," he said.

S&P points out that while most borrowers have solid credit, supply-chain finance has spread to more speculative companies, which could be quickly cut off from the facilities. The risk is that these borrowers either can’t pay their suppliers or won’t pay back their loans.

One of the highest-profile suppliers of supply-chain finance is Greensill Capital, which is backed by almost $1.5 billion from SoftBank Group Corp. ’s Vision Fund, and last year did a total of $150 billion in financing, according to its website.

Lex Greensill, the company’s founder and chief executive, said in an interview that he believes the problem facing the industry is “demand has escalated so much that providers are not going to be able to keep up,” rather than existing financing being withdrawn. His company has seen demand triple in the past few weeks, he said, adding it was “working flat out to get more support to more corporates.”

The Credit Suisse funds, which the bank said aren’t sold to individual investors, source their assets totaling around $9 billion mostly from Greensill. Greensill sells the debts owed to suppliers to the funds in the form of short-term notes.

Credit Suisse in a 2017 magazine described the funds as “similar to the money market.” A spokeswoman said that despite the adverse markets, the funds have “delivered a solid performance so far,” and all redemptions had been met.

The notes held by the Credit Suisse funds include debts owed by big U.S. corporations, such as General Mills Inc. and Kellogg Co. Some of the notes are from companies whose bonds have junk status, such as Newell Brands Inc. Others are from companies affected directly by the pandemic, such as car manufacturer Nissan North America Inc. which has shuttered its plants due to the virus. A Newell Brands spokeswoman said the company no longer works with Greensill.

A spokeswoman for the Financial Accounting Standards Board said the accounting-rules maker is researching a request made in October by the Big Four audit firms for clearer guidelines on how supply-chain finance obligations should be reported.

FT : Germany’s testing success looks real — for now

Germany’s testing success looks real — for now
But statistics that show how many days one country is behind another are humbug

Germany has one of the best healthcare systems in the world — so good that some expats abroad fly home when they get sick.

There is no doubt that the Germans got one big thing right during the early stages of the Covid-19 crisis: they tested, tested and tested again. By doing so, they managed to prevent their own crisis hotspot, the district of Heinsberg to the west of Cologne near the Dutch border, from turning into another Bergamo.

Germany is now conducting Covid-19 tests at a rate of 350,000 a week, having tested close to 1m out of a population of 80m so far. The numbers of tests that have been carried out in France, for example, are only a tenth of that.

But it would be a mistake to conclude from the recorded number of infections that Germany has the virus under control when others do not. Or that Germans are less prone to die from the disease. Its low recorded mortality rate — 15 per 1m people, lower than most of Europe — is influenced by its sheer number of tests. If you test 10 times more people, you will catch many with mild symptoms, or none. Your recorded mortality rate will be lower compared to countries that do not test as much.

In Germany, the virus did not spread from the young to the old as quickly as happened in Italy. My own experience from having lived in Italy is that older Italians are more integrated into their communities than older Germans, most of whom live away from their families, often in care homes. The virus took a while to spread in Germany, but this is now starting to happen too.

Nor can we conclude from the data that Germany is on a different trajectory than other countries. All we know is that it did a good job getting ready. In particular, Germany started the lockdown well before mortality rates shot up. Schools have been transformed into makeshift hospitals for the avalanche of cases they are expecting this month.

Germany also has more critical care units and ventilators than other European countries. I would expect it to be better at maintaining a functioning health system for non-Covid-19-related illnesses and emergencies at the same time. But German doctors are no better at treating the disease than doctors elsewhere and German healthcare workers, too, suffer from a shortage of masks.

A study on the 2009 swine flu epidemic found that real-time mortality estimates were all over the place. It concluded that we still lack agreed methods to measure mortality rates. Given different rates of testing and inconsistent ways of measuring fatalities across countries, we should avoid real-time cross-country comparisons. Statistics purporting to tell us how many days one country is behind another are humbug.

Lothar Wieler, president of the Robert Koch Institute in Berlin, the federal government’s health agency, has said the true mortality rate in Germany is probably higher than the officially recorded number. He reported on some tentative evidence that the number of new infections might be slowing down, but said it was too early to make firm conclusions.

It is possible, but yet to be proved, that Germany has managed to control the spread of the virus better than others through its policy of mass testing. But I would be very surprised if the final German mortality rate turns out to be different from others’. Germany has so far reported a third of France’s absolute level of deaths, despite a bigger population. Yet since the virus affects the old more than the young, one would expect Germany’s eventual mortality rate to be higher than in France, which has a younger population. If this turns out not to be the case, it will either be due to the quality of emergency care or to factors we may not yet fully understand.

In the meantime, be wary of forecasts. Statistics is one of the most potent tools mathematics has made available to other sciences. But like any power tool, it can cause havoc in the wrong hands. We should rely on experts, but the experts in question are not economists and armchair virologists. They are bio-statisticians who understand not only the statistical methods but also the many subtleties behind the data.

Anyone prone to drawing big conclusions from popular online virus data trackers should heed Robert Grant, a British medical statistician who tweeted last week: “I’ve studied this stuff at university, done data analysis for decades, written several NHS guidelines (including one for an infectious disease), and taught it to health professionals. That’s why you don’t see me making any coronavirus forecasts.”

In that spirit, we should take note of the German statistics and resign ourselves to the realisation that their main usefulness at this point is to raise questions, rather than provide answers.

FT : Luckin Coffee apologises for alleged fraud

Luckin Coffee apologises for alleged fraud
Group promises stronger controls after hundreds of millions of dollars of fake sales found

Luckin Coffee on Sunday apologised and pledged to strengthen controls after an internal investigation found hundreds of millions of dollars of fake sales last year, wiping about 75 per cent off the company’s market value.

Lu Zhengyao, the company’s chairman, said on social media that he was “ashamed” and “accepted all questions and criticisms”, while promising to do his best to recover the losses. Mr Lu backed the start-up in 2017 as it aimed to take on Starbucks in China and remains one of its largest shareholders. 

“I personally blame myself. Regardless of the final findings of the independent committee, I will bear the responsibility that I ought to,” Mr Lu said in a post widely reprinted by local Chinese media on Sunday.

Mr Lu is also the chairman of Hong Kong-listed China Auto Rental, whose share price plunged as much as 70 per cent on Friday as investors cut their exposure to the entrepreneur’s businesses. “We’ve let down and hurt too many people,” Mr Lu said.

Several employees, including Luckin’s chief operating officer, have been suspended and are under investigation and Luckin said it reserved the right to take legal action against them. The group warned last week that its previous financial statements could no longer be relied on.

Law firms in the US have already begun recruiting investors with losses to join class-action suits against the lossmaking company, which had more than 4,000 outlets by the end of 2019. 

China’s securities regulator condemned the alleged fraud on Friday and said it would look into the case.

“The company will also deeply reflect and repent, and strengthen our internal controls,” Luckin said in a statement. The internal investigation, overseen by a special committee of the board, is in its early stages and Luckin said its conclusions would be made public.

“We will take all necessary remedial measures and we will not skirt any problems brought on by this matter,” the company said, noting it would continue to serve its customers and operate normally in the meantime.

The company revealed last week that the early stages of the investigation indicated that the “aggregate sales amount associated with the fabricated transactions from the second quarter of 2019 to the fourth quarter of 2019 amount to around Rmb2.2bn ($310m)”.

The intense local media coverage of the alleged fraud has spurred a rush of customers to Luckin’s takeaway coffee shops. Some are apparently worried they might not be able to cash in their discounted coffee coupons that the chain is known for.

“If we wait any longer, we won’t have the opportunity to drink anything,” said one user on Weibo, China’s version of Twitter.