GSX Rebuts Short Seller Report; Shares Continue to Slide
One day after the report was released, GSX issued a rebuttal to the short-seller allegations, saying the report contained numerous errors, unsubstantiated statements, and a misinterpretation of information.
China's K-12 after-school tutoring provider, GSX Techedu Inc. (NYSE: GSX) saw its shares drop more than 5% on Tuesday and additional 4% today, closing at $29.67 per share after investment firm Citron Research called GSX "the most blatant Chinese stock fraud since 2011" in a short seller report.
In the report published on Tuesday, Citron claimed that "GSX Techedu Inc is overstating revenue by up to 70% and should immediately halt trading and launch an internal investigation."
One day after the report was released, GSX immediately issued a rebuttal to the short-seller allegations, saying that the report included numerous errors, unsubstantiated statements, and a misinterpretation of information.
"The company has two K-12 live large course brands, Gaotu and Genshuixue, with Gaotu contributing more than a majority of the company's net revenues from K-12 courses," the company said. "The report falsely equated the revenue from Genshuixue to the company's entire revenue from K-12 courses, showing an apparent ignorance of the company's business."
According to GSX, it is the first online education company to have a market capitalization exceeding $10 billion, and it has set its sights even higher.
Sandy Qin, the head of investor relations for GSX, told CapitalWatch that the company is working towards a market cap of $100 billion.
In 2020, GSX expects to generate revenue growth of 200%, and significantly expand the number of employees.