GSX Techedu - "70% Of Revenues Fabricated" Short Seller Reports

GSX Techedu – “70% Of Revenues Fabricated” Short Seller Reports

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GSX Techedu Inc. Reportedly Overstating Revenue – GSX Techedu Investors Who Have Suffered Losses Greater Than $50,000 Encouraged To Contact Kehoe Law Firm, P.C.

Kehoe Law Firm, P.C. is investigating potential securities claims on behalf of investors of the American Depositary Receipts (“ADRs”) of GSX Techedu Inc. (“GSX Techedu” or the “Company”) (NYSE: GSX), as a result of allegations that GSX Techedu may have issued materially misleading business information to the investing public.

On April 14, 2020, Citron Research issued a report (“GSX Techedu Inc – The Most Blatant Chines Stock Fraud since 2011“) which, among other things, stated that “GSX Techedu Inc is overstating revenue by up to 70% and should immediately halt trading and launch an internal investigation.”

Citron Research reported the following “takeaways from Citron’s extensive due diligence”:

After tracking >20% of available GSX classes, Citron estimates that 2019 revenue was overstated by 70% 

[Citron’s] data indicates that most students are not from lower-tier cities, as GSX claims, when trying to explain how the company can grow so quickly when most Chinese parents in Tier 1 and 2 cities have never heard of them

Wuhan and the surrounding area make up almost 50% of the student composition in Q1 2020, which further supports [Citron’s] thesis that a large % of revenues are fudged given the large number of free classes offered to students of Wuhan during the Covid-19 crisis and, just as importantly, implies that GSX couldn’t have a strong diversified student base to begin with, and that the previous sales revenues are largely exaggerated

Duplicated classes (i.e., counted more than once) could be one way that revenues are inflated

GSX management has deflected criticism with unconvincing explanations that show a greater interest in protecting their stock price than operational integrity, and their filings are riddled with suspicious transactions [Emphasis added.]

Citron Research, “[a]s a result of [its] investigation . . . calls on the internal audit team at GSX to look into student enrollment numbers and revenue more closely. [Citron’s] research suggests a huge discrepancy between reported figures and reality.” [Emphasis added.]

On this news, GSX’s ADR share price fell sharply during intra-day trading on unusually high trading volume, thereby damaging investors.

GSX Techedu investors who purchased, or otherwise acquired, GSX American Depositary Receipts and suffered losses greater than $50,000 are encouraged to contact either Michael Yarnoff, Esq., (215) 792-6676, Ext. 804, [email protected], [email protected], or John Kehoe, Esq., (215) 792-6676, Ext. 801, [email protected], to discuss potential legal claims.

Kehoe Law Firm, P.C.