GSX Techedu Inc.
Lead Plaintiff Deadline: 06/16/2020
SUMMARY OF CASE:
A securities class action has been filed against GSX Techedu Inc. (GSX) on behalf of a class consisting of all persons and entities other than Defendants who purchased or otherwise acquired GSX securities between June 6, 2019 through April 13, 2020. This case has been filed in the USDC – NJ.
GSX is a technology-driven education company that provides online K-12 after-school tutoring services in China. The Company also provides a variety of other tutoring courses and services, such as English courses for children in kindergarten, foreign language courses, English test preparation courses for students taking post-graduate entrance exams, professional courses for working adults preparing for professional qualification exams, personal interest courses, and offline business consulting courses. Additionally, the Company operates Weishi, an interactive learning platform on the popular Chinese digital application (“app”) WeChat.
The Complaint alleges that throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operational and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) GSX overstated its profitability, revenue, student enrollment figures, teacher qualifications, and teacher selection process; (ii) the foregoing, once revealed, was foreseeably likely to have a material negative impact on the Company’s financial results; and (iii) as a result, the Company’s public statements were materially false and misleading at all relevant times.
On February 25, 2020, Grizzly Research LLC (“Grizzly”) published a report highlighting multiple alleged issues with GSX’s business and financial operations (the “Grizzly Report”). Specifically, the Grizzly Report alleged, among other issues, that the Company “has been drastically overstating its profitability in its US public filings, especially for 2018”; Grizzly “found multiple strong indications of past and current order ‘brushing,’” which are “essentially fake student enrollments to boost student count”; “many of GSX’s reported students do not actually exist”; and “[w]hile [GSX] touts its high-quality teacher recruitment mechanism, [Grizzly] found a sign-up website that was not functional, multiple allegations of GSX hiring teachers right out of college with no prior experience, and fabricated teachers profiles.”
Following publication of the Grizzly Report, GSX’s ADS price fell $1.33 per share, or 2.93%, to close at $44.09 per share on February 25, 2020.
Then, on April 14, 2020, Citron Research (“Citron”) published a report highlighting additional alleged issues with GSX’s business and financial operations (the “Citron Report”), including, among other issues, that the Company’s “2019 revenue was overstated by 70%,” that “sales revenues are largely exaggerated,” and that the Company’s “filings are riddled with suspicious transactions.”
Following publication of the Citron Report, GSX’s ADS price fell $0.20 per share, or 0.64%, to close at $31.20 per share on April 14, 2020—a total decline of 31.31% since the truth concerning GSX’s alleged fraud began to emerge.