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
“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.
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.
Nasdaq to tighten listing rules and restrict IPOs by Chinese firms
Headed by prominent short seller Carson Block, the activist firm said GSX “is a massive loss-making business” after analysing user and attendance data files of more than 54,000 users covering over 200 paid K12 classes. “Without users, there is no revenue,” it added.
This is not the first time the Chinese online tutoring sector is facing off with short sellers. TAL Education Group and New Oriental Education & Technology, two of China’s largest physical tutoring centre operators, have also come under attacks in 2018 and 2012, respectively.
Before Muddy Waters, peers like Citron Research, Scorpio VC and Grizzly Research had taken aim at GSX in five separate reports since February, alleging the online tutoring firm cooked its book.
GSX Techedu, which was listed in June last year, has denied all of them. Instead of tanking, its share price has surprisingly surged by a stunning 50 per cent since the beginning of this year.
The company offers online courses for primary pupils, high school students and adults on subjects ranging from English to accounting.
It reported a 337 per cent jump in first-quarter net profit to 148 million yuan (US$21 million) from the same period last year, according to its quarterly earnings report filed earlier this month.
Paid course enrolments soared 307 per cent to 774,000 over the same period, amid a surge in online teaching as schools were shut across China due to the Covid-19 pandemic, it added.