But Citron and others, including Grizzly Reports and Muddy Waters Research, have raised red flags. But there’s no such margin afforded when you compare growth rates among generated sales between $200 million and $550 million. Ultimately, this is a complete stock fraud – concluding between 70% to 80% of this company’s users are fake. Financial Market Data powered by FinancialContent Services, Inc. All rights reserved. However, the problem is that it took many years for TAL and New Oriental Education to breach the billion-dollar threshold. “But I have confidence the system will work eventually.”. That alone is anomalous compared to growth rates seen in other Chinese education providers. Mr. Left is a private investor with 18 years trading experience. I encourage everyone to read Citron’s report carefully. It isn’t a pretty one, to be sure. GSX Techedu Inc. (NYSE: GSX) ("GSX" or the "Company"), a leading online K-12 large-class after-school tutoring service provider in China, today firmly denied the false and ungrounded allegations raised in a report by Citron Research dated April 14, 2020. Is there enough public information to suggest concern with GSX stock? Copyright © 2020 InvestorPlace Media, LLC. “It gives me more confidence. But at least you have an idea of what you’re really dealing with. A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. As a China-based education company, GSX Techedu should have growth metrics similar to companies in its industry. Further, given the dramatic explosion of sales in its most recent quarter, the company is on track to exceed revenue of $1 billion if the trajectory holds. Druckenmiller in June said he had become more bullish on stocks. Left did not provide numbers for the fund’s 2020 performance. Nevertheless, it arouses suspicion, especially when GSX spends so little on its research and development. Out of companies not named GSX, the highest YOY rate generated was 185.7%. Hence, Andrew Left’s claims that 70% to 80% of GSX’s users are fake have credibility under peer review. Consider that there is a request on Change.org demanding that the Securities and Exchange Commission take immediate action against GSX stock. Citron found that GSX’s disclosed related entity Beijing YouLian (i.e., JiaZhangJia) has been posting job openings as recently as this month with GSX headquarters and undisclosed related entity Beijing JiaZhangCun listed as the work address. NEW YORK (Reuters) - Short-seller Andrew Left is betting the Trump Administration's hardening line on U.S.-listed Chinese companies will help derail a rally in the shares of GSX Techedu Inc. , which have surged some 200% since his firm announced its short position in the stock. Nasdaq What I’m confident about, though, is that you should perform extensive research before buying shares. Further, it’s not out of the realm of possibility that a Chinese company would cheat this shamelessly. In this framework, the average YOY growth rate (again, not including GSX’s rate) is much lower than the first framework at 37%. Ordinarily, that would draw a teacher’s attention. “Citron presents to US regulators definitive evidence of GSX Techedu (NYSE: GSX) committing securities fraud through the use of multiple undisclosed related party transactions to hide expenses/liabilities ”. Moreover, Citron Research released a detailed study in April of this year, analyzing line by line evidence of fake users propping up a shell of a business. Interestingly, when you back out GSX’s absurd growth rates and replace them with reasonable ones that are in line with industry averages, you get a clearer picture of GSX stock. They are: Despite being the new kid on the block, GSX Techedu enjoys an unusually robust revenue trend, a trend that is practically vertical against the competition. Here’s what I did. 1125 N. Charles St, Baltimore, MD 21201. 1125 N. Charles St, Baltimore, MD 21201. an immediate fraud investigation is needed of this Chinese company. Whereas the previous chart showed the 2 years leading up to IPO, this is the completely obscene lies that GSX attempts to tell going forward. Rather than cheat smartly, though, he gets all the answers correctly, besting the top achievers in the class. Shorting is very risky business. All quotes delayed a minimum of 15 minutes. Would GSX Techedu commit such a brazen crime? According to Left and multiple sources, the answer is an alarming yes. Back in February, Grizzly Research claimed that GSX was inflating its revenue and student numbers. It makes me think that Deloitte will take a second look at this,” Left said. Exclusive: Citron’s Andrew Left Blasts GSX Techedu as a ‘Fraud’, 7 Outdated Tech Stocks to Sell Before It’s Too Late, Louis Navellier and the InvestorPlace Research Staff, Don’t Chase CIIG Merger in the EV Stock Buying Frenzy, Matt McCall and the InvestorPlace Research Staff, What Did the Stock Market Do? In 2018, GSX generated revenue of $57.7 million, up nearly 290% from 2017’s tally. This makes sense because of the law of large numbers – the larger the comparisons, the “harder” it is to generate big percentage gains.
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