On February 22, following a strong fourth-quarter report, NYSE-listed Chinese online education company GSX techedu (GSX: NYSE) saw its stock rise almost 10% to as high as USD 44.98, pushing its market value to over USD 10 billion. The Beijing-based, online K12 large-class after-school tutoring service provider became the world's fastest and the third Chinese Edtech company to break through the USD 10 billion mark after New Oriental (EDU: NYSE) and TAL (TAL: NYSE).
This didn’t last for long – after reaching its record high of USD 45.42 per share on February 22, it fell 3.96% to USD 43.3 the following day. Grizzly Research, a research firm that produces differentiated research insights on publicly traded companies, released a 50-page report, ‘Why We Believe GSX Techedu is the Worst Publicly Traded Education Company.’ The report stated that China’s recent stock market figures, which have attracted much attention from the capital market, represent exaggerated financial data.
After Luckin Coffee’s huge transaction fraud was exposed, and Chinese education giant TAL’s employee conspired with an external supplier to falsify the company’s sales revenue by forging contracts and other documents, the Chinese stock market encountered a crisis of trust.
Recently released annual report data of the GSX techedu also encountered market doubts. Forcing the company to hold media communication conference. At the conference, GSX disclosed to investors detailed company data in multiple dimensions, including cash. The firm disclosed the distribution of cash and cash equivalents, short-term investment and long-term wealth management investment.
As of December 31, 2019, the company held cash and cash equivalents equivalent to CNY 74 million, short-term investment equivalent to CNY 1.47 billion, long-term investment equivalent to CNY 1.19 billion. Among them, CNY assets are held by seven domestic entities, and the USD assets mainly derived from IPOs are held by overseas Cayman entities, and no foreign exchange settlement transactions have been conducted since the IPO.
When asked about the reduction of stock and the problem of stock pledges. Larry Xiangdong Chen, the founder of the firm said, “So far, no one from the core management of GSX has reduced stocks. Many of our first-line partners were reluctant to sell company stocks during the window period in March.”
After holding a conference for consecutive days from April 8 to 9, GSX saw its stock price surge 8.8% to USD 33.16 as it closed on Thursday.
Despite being influenced by many factors, the stock price, which is more than USD 32, compared with less than USD 10 at the beginning of the listing, has more than tripled.