Chinese tutoring provider GSX denies claims its online students are bots as Muddy Waters joins stock attack

Muddy Waters alleges 80 per cent of GSX users are bots, company ‘a massive loss-making business’

Allegations show lack of understanding on its business, CEO Chen says in statement on his Weibo account

Reading Time:2 minutes

Short sellers have repeatedly targeted GSX Techedu since its listing on the New York Stock Exchange in June 2019. Photo: AP

Published: 2:49pm, 19 May 2020Updated: 10:58pm, 19 May 2020

GSX Techedu, one of China’s largest online tutoring providers, has denied allegations by Muddy Waters that it has fabricated most of its users and revenue, saying the US activist short seller misunderstood its business.

New York-listed GSX fell 7.4 per cent lower at US$32.84 in New York overnight, after earlier plunging by as much as 16 per cent following the release of the short report on Monday. The Monday report by Muddy Waters represents the sixth time GSX has come under attack by short sellers in the past four months.

“The company believes the report contains inaccurate and disorderly data courses, and shows a lack of understanding of GSX’s business,” it said in a statement published by chief executive Chen Xiangdong’s account on Weibo, a Twitter-like social media platform.

CEO Xiangdong Chen (right) has rejected the latest allegations by Muddy Waters, saying it lacked understanding on the company’s business. Photo: AP

GSX released technical details regarding its user IP addresses, and said it continues to make profits with a positive cash flow, Chen said in a separate statement.

The controversy came at a fragile time when investor confidence in US-listed Chinese companies has taken a beating after a series of scandals, including the Luckin Coffee fiasco. The coffee chain last week fired its chief executive and chief operating officer after an internal probe on fabricated sales.