GSX Techedu Inc (GSX) stock is currently tumbling because of several reasons. An important reason that many analysts mention about the tumbling of the stock is an allegation of fraud on the company. These allegations were made by short-sellers.
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GSX Techedu is an education-based company from the Beijing that is currently providing its services to K-12 students., The company initially held its public offer on the New York stock exchange at $3 billion. During the pandemic, the demand for online grew enormously. Because of this high demand the company tenfold from its initial offering. Currently the company own an amount of $24 billion. The CEO Larry Chen is now considered among the top 200 richest people in the world.
Why GSX started Tumbling.
- Every company faces rise and fall during the company growth. Currently the company is facing allegation of fraud from the short sellers. Due to these allegations the company didn’t perform that much better as it was supposed to do. During the months of February and May, a legion of investment firms — known for betting against companies in a practice called “short selling” — published a report in which they decry GSX Techedu as near total fraud.Similarly, the short sellers also reached to the same conclusion.
Response from the Company Management:
- Company management recently gave a stamen of clarification about the allegation of fraud. Larychen on Weibo account stated that it was the first time he encountered such absurdities and lies.
- Furthermore, the company CEO state that, “The Company endeavors to provide full and accurate disclosure to investors and to rebut any false claims that attempt to impair market confidence in GSX’s business.
- Similarly, the company CEO also invited an independent audit committee that engages third-party professionals advisers to conduct an independent review into these reports’ key allegations.
The allegation of fraud affected the company’s image and growth drastically. The company’s performance is currently struggling due to these allegations. To encounter these allegations the company management also issued various statements that can change the perception of the investors. The company is trying everything to prove these allegations wrong.