(Yicai Global) Feb. 4 -- Luckin Coffee's shares have kept on falling for two straight days despite refuting a crushing report that US short-seller Muddy Waters Research posted about China's biggest coffee chain.

Luckin Coffee's shares [NASDAQ: LK] dropped 3.51 percent to close at USD31.35 yesterday, with a USD8.2 billion market cap. After the short-seller's Jan. 31 tweet, the stock price tumbled as much as 10.74 percent intraday. The startup priced its shares at USD17 in its May 2019 initial public offering. 

Luckin Coffee's financial data is real and authentic, the Xiamen-based company said in a statement yesterday. The report brought forth by Muddy Waters is groundless and malicious, it added.

The California-headquartered firm posted a link to a report whose anonymous author claimed to have recorded over 11,000 hours of store surveillance footage. Based on that, the writer said that the coffee chain has exaggerated the number of items sold by as much as 88 percent in the fourth quarter of 2019. Moreover, prices per item were allegedly inflated by over 12 percent.

Founded in 2017, Luckin Coffee surpassed Starbucks to become the largest coffee chain on China's mainland with 4,500 outlets by the end of last year. The rapidly grown startup, which focuses on takeout, is known for its generous online discounts. 

The company has a strong internal data management system that cross-checks data with third-party payment platforms, it added. The firm also denied the report's allegation of dressing a part of losses as advertising costs.

Luckin Coffee's business pattern is inherently flawed because trying to boost sales by continuously offering discounts is impossible due to the price-sensitive target group, the report added.  

The coffee chain will stick to its business model and remain confident about benefiting from China's growing coffee market, it added. 

Editor: Dou Shicong, Emmi Laine