The educational software provider said research firm Muddy Waters “lacks a basic understanding” of its business after an assessment that at least 70 percent of GSX users are bots that dragged its stock down 7.3 percent on Monday. This material may not be published, broadcast, rewritten, or redistributed. Analysts, on average, had estimated revenues of $288.53 million for the quarter. “When the formal class starts, the tutor will transition all his or her students from the small groups to the instructor's large class, and the instructor takes over. By creating an account, you agree to theTerms of Service and acknowledge our Privacy Policy. Additionally, exchange operator Nasdaq on Monday evening proposed rules that will tighten restrictions for foreign companies trying to list shares. © 2020 Benzinga.com. The company attributed the rising opex to higher customer acquisition costs in the wake of competition and extensive investment in its teaching staff, product design, content development and technology innovations. Legal Statement. In a perfectly competitive market with no barriers to competition, a profitable business model will be imitated immediately, and in the end, can only maintain market profits and losses. FAQ - Updated Privacy Policy. The spending, the company said, is an important investment for the long-term future. The measures include a mandate that companies from some countries, including China, raise at least $25 million in their initial stock offerings and a requirement that audits be conducted to make sure international franchises meet global standards. GSX … Get pre-market outlook, mid-day update and after-market roundup emails in your inbox. Muddy Waters responded to GSX’s statement with a series of tweets on Tuesday, saying the Beijing-based company's claim of a misunderstanding was the same response employed by the previous seven companies that were delisted following its investigations. Gross billings increased 137.1% year-over-year. Posted-In: Citron ResearchEarnings News Short Sellers Movers Trading Ideas Best of Benzinga, Thank you for subscribing! Why It's Important: GSX Techedu has been a target for shorts who have accused the company of following a fraudulent business model. The allegations against GSX come as the U.S. considers stricter requirements for Chinese companies trying to list on American exchanges in retaliation for Beijing's handling of the COVID-19 pandemic. “Typically, a tutor offers a prep session before a paid class to warm up students with games and quizzes,” the company added. A daily collection of all things fintech, interesting developments and market updates. Chinese beverage-chain Luckin Coffee was informed by Nasdaq on Tuesday that its shares will be delisted after an internal investigation showed the company’s chief operating officer and other employees fabricated sales. Everything you need to know about the market - quick & easy. GSX Techedu offers online K-12 courses for primary and secondary grades. Muddy Waters vowed to “show more GSX fraud” soon. GSX Price Action: The stock was down 20.73% at $56.56 at last check Friday. National Economic Council Director Larry Kudlow argues the U.S. has to hold Chinese companies listed on the NYSE and Nasdaq accountable for investor protection and national security reasons. Related Link: Citron Calls GSX Techedu 'Most Blatant Chinese Stock Fraud Since 2011,' Company Says Report False. Market data provided by Factset. What Happened: The Beijing-based company reported third-quarter revenue of 1.97 billion yuan ($289.532 million), representing roughly a 253% year-over-year increase. ... Its business model … Mutual Fund and ETF data provided by Refinitiv Lipper. GSX said it's “committed to maintaining the highest standards of corporate governance.”. Competitors can quickly copy any new business model. GSX Techedu Inc. fired back against accusations the company is a “near-total fraud.”. The company’s business model is … Yet with operating expenses ballooning by about 500%, the company reversed from a profit of 0.01 yuan per share to a loss of 3.91 yuan or (57 cents) per share. All rights reserved. The company also provides foreign language and professional courses. GSX disputed Muddy Waters’ claim that there was a 28.2 percent IP address overlap between students, instructors and tutors, saying its dataset for paid classes conducted between January and March showed a 0.78 percent overlap. GSX has basically imitated the double-teacher model as we say TAL and New Oriental using it way before. If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com. Citron Calls GSX Techedu 'Most Blatant Chinese Stock Fraud Since 2011,' Company Says Report False, GSX Techedu IPO: What You Need To Know About The Chinese Education Company, 10 Consumer Discretionary Stocks With Unusual Options Alerts In Today's Session, 10 Consumer Discretionary Stocks Showing Unusual Options Activity In Today's Session, 54 Stocks Moving In Friday's Mid-Day Session, Mid-Morning Market Update: Markets Open Lower; Foot Locker Profit Beats Expectations, Privacy Policy / Do Not Sell My Personal Data. Quotes displayed in real-time or delayed by at least 15 minutes. All rights reserved. Create one. Why It's Important: GSX Techedu has been a target for shorts who have accused the company of following a fraudulent business model. GSX Techedu answered fraud allegations by Muddy Waters Research, saying the firm doesn't understand its business. Don't have a Benzinga account? TRUMP GETS TOUGH ON CHINESE STOCKS IN CORONAVIRUS STANDOFF WITH BEIJING. Related Link: GSX Techedu IPO: What You Need To Know About The Chinese Education Company. Powered and implemented by FactSet Digital Solutions. GSX Techedu adopts an online live large-class format to deliver its courses, which the Company believes is the most effective and scalable model to disseminate scarce high-quality teaching resources to aspiring students in China. Its business model focuses on large live online classes, which typically begin as smaller groups with multiple tutors, GSX said in an explanation of why large numbers of students appear to be signing up at precisely the same time.