On May 20, Luckin Coffee (OTCMKTS:LKNCY) came off its six-week trading halt. And since then, there’s been an intriguing bull case for Luckin stock.

Obviously, that bull case contained no shortage of risk. An internal investigation showed that Luckin executives fabricated 2.2 billion RMB (more than $300 million) in revenue over the last three quarters of 2019. That figure totaled nearly half of reported revenue.

What a year ago looked like one of China’s best growth stories instead appeared a run-of-the-mill fraud. Investors would be forgiven for assuming that Luckin stock was headed to zero — or, at the least, simply wasn’t, and isn’t, worth the trouble.

But even accepting the massive fraud, there was still a way to see upside in LKNCY. Indeed, it seemed likely that the stock was trading at a discount to the company’s assets. Perhaps, under new management, that would be enough.

To be sure, I wasn’t buying that bull case, as I wrote last month. Yet it wasn’t nearly as outlandish as it appeared.

The problem now, however, is that even that bull case appears upended. At this point, it’s hard to see what reasons remain for optimism.

The Case for Luckin Stock

Again, the argument for Luckin stock after the halt — when the stock fell at one point below $2 — was that there was potential upside even after the massive revenue fraud.

The fundamental pillar of that case was the balance sheet. Luckin reported nearly $800 million in cash on the books at the end of last year’s third quarter. It raised another $865 million in January via sales of equity and debt.

In other words, it seemed likely in May and June that Luckin still had at least $1 billion in cash net of debt. That figure held even if the company had burned cash (as was almost certain) and if insiders had pilfered some of the funds (as seemed possible, if lacking evidence).

With roughly 250 million shares outstanding on a diluted basis, Luckin’s market cap didn’t reach $1 billion until its stock hit $4. Below that value, it seemed like investors were getting the business for a negative value.

To be sure, that business is not what investors thought it was. But it still exists. There are still millions of customers and thousands of locations. Starbucks (NASDAQ:SBUX) has had big success in the Chinese market; even a second-place rival would seem to have some value.

Such a case would take time. It would take years to regain investor confidence. The strategy needed to change. After all, Luckin well may have executed on the most aggressive growth strategy in history: its store count went from zero to over 4,500 in a little over two years.

Some of those locations perhaps would be closed. Marketing strategies would change, with discounting cut back. But operating lease figures suggested the company had flexibility to do so. The cash gave it time. A smaller, honest Luckin seemingly had the potential to deliver 100% or greater returns from a share price below $4.

On Paper

Again, I wasn’t buying that case. The fraud permeated Luckin management so deeply that it’s hard to know who can actually run the business at this point. The only executives not implicated almost by definition don’t know enough about the business to manage its properly.

Meanwhile, Luckin’s quiet acceptance of its delisting showed that a lack of interest in U.S. shareholders. Luckin stock plunged on the news that the company wouldn’t appeal; even if such an appeal was likely to be denied, extending the listing would have allowed for a more orderly exit by shareholders.

On paper, the case worked. In practice, there were too many risks.

Where’s the Cash?

The problem is that the paper case took a big hit last month, too. On July 15, Luckin issued a press release detailing the appointment of liquidators in the Cayman Islands, where the publicly-traded subsidiary is located. (The same is true of Alibaba (NYSE:BABA) and other Chinese companies.)

In the press release, Luckin disclosed its estimated cash balance at Jun. 30. The figure was just $780 million. That’s almost exactly where cash sat nine months earlier — despite the aforementioned $865 million raise in January.

The obvious question is: where’s the cash? Burn by the business itself almost certainly isn’t the only answer. Third quarter free cash flow, for instance, was just negative $67 million as reported. Assuming that rate held, Luckin would have lost roughly $200 million in the following three quarters.

Was the cash taken? So far, we have no evidence that is the case. Luckin has said its investigation showed fabricated revenue, but no direct theft. One assumes the company would have disclosed such an action had it been discovered, and that it would have been discovered at this point.

Was Luckin reporting false cash flow numbers as well? That’s certainly one possibility. The other is that cash burn accelerated sharply in the last nine months.

The problem is that there’s no good answer.

Stay Away from Luckin Stock

Whatever the cause, even the asset-based case for Luckin stock starts to fall flat. Cash of $780 million, less debt of $450 million, leaves about $1.30 per share in cash net of debt.

Most of that cash, meanwhile, is held in China. More will burned on operating losses going forward. Very little, if any, is going to be returned to shareholders any time soon.

So what’s the case for LKNCY stock at this point? There’s a business here, but it appears to have burned cash at an accelerated rate in recent quarters. There’s new management, but it’s not as if those executives are going to liquidate the company or start paying a dividend. And with the iQiyi (NASDAQ:IQ) under investigation and reports swirling around GSX Techedu (NYSE:GSX), Luckin’s fraud looks like it may be a symptom of a structural problem, rather than a fixable, one-off event.

There’s one more figure worth considering. Luckin’s convertible bonds — issued in January — ostensibly should be repaid. Again, the company believes it has $780 million in cash. That’s more than enough to repay the $450 million owed and fund a smaller business with (presumably) lower losses.

Yet the bonds trade at 41 cents on the dollar. It’s another sign of how little savvy investors trust Luckin management.

That lack of trust was a problem when it seemed like the assets were worth $4-plus per share. Now, it removes any reason to even consider risking hard-earned capital on Luckin stock.

Vince Martin has covered the financial industry for close to a decade for InvestorPlace.com and other outlets. He has no positions in any securities mentioned.