GSX stock

Brushed Student Counts and Cooked Books: Why We Believe GSX Techedu is the Worst Publicly Traded Education Company

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• GSX Techedu Inc. (NYSE: GSX) (“GSX Techedu” or “GSX”) is portrayed as a rising star in China’s online education space, having seen its stock more than triple since its NYSE IPO in June 2019.

• GSX reports financials to the SEC that we believe are simply too good to be true. Our extensive research including review of PRC Credit Reports, SAIC filings, and web analysis indicate to us that GSX’s success is actually based on a fraudulent scheme.

• PRC Credit Reports suggest that the company has been drastically overstating its profitability in its US public filings, especially for 2018.

• We found multiple related parties that we suspect are used to offload costs to report better financials to the SEC and investors. Employee CVs, job recruitment postings and work locations indicate several off-balance sheet entities that are actually the alter-egos of GSX.

• We are deeply concerned about the recent acquisition of commercial real estate in the city of Zhengzhou, China in January 2020, and we suspect CAPEX fraud. According to our research, a total of only RMB 75 million went into the facilities that GSX recently purchased for over RMB 330 million.

• Our research found multiple strong indications of past and current order “brushing”

– essentially fake student enrollments to boost student count.

• Our web traffic analysis supports the opinion that many of GSX’s reported students do not actually exist.

• While the company touts its high-quality teacher recruitment mechanism, we found a sign-up website that was not functional, multiple allegations of GSX hiring teachers right out of college with no prior experience, and fabricated teachers profiles.

• We distrust management deeply. Insiders and old shareholders are selling aggressively.

• GSX’s former CFO left in a rush during the 2019 IPO, and the current CFO was formerly involved in a Chinese online education company that also has numerous allegations of being a scam.

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