Hall of Shame

Consumer Discretionary

GSX Techedu (GSX US)

Year: 2020

GSX TECHEDU INC. is a China-based holding company principally involved in the provision of technology-driven education services. Through its subsidiaries, the Company is engaged in the provision of online K-12 after-school tutoring services. It also offers foreign language, professional and interest courses.   It listed on the NYSE in June 2019, raising US$207.9M during its IPO.  In an additional share offering in November 2019, US$289.8M was raised.

Feb 25, 2020  Grizzly research issued a report titled "Brushed Student Counts and Cooked Books: Why We Believe GSX Techedu is the Worst Publicly Traded Education Company".   In its report, Grizzly Researchs allegations include that GSX :-
       -  has been vastly overstating its profitability,
       -  is offloading cost to multiple related parties to report better financials
       -  conducting CAPEX fraud
       -  faking student enrollments to boost count
It also notes that Insiders and old shareholders are selling aggressively, that GSX's former CFO left suddenly during the IPO and the current CFO was previously involved with a dubious on-line education company. 

In conclusion Grizzly Research believe that GSX is a fraud and say "GSX should not hold up to the due diligence of any credible institution. A simple online review would reveal that the company is not what it portrays itself to be. Red flags around the CFO departure were blatantly ignored. Financials that are simply too good to be true are taken at face value. GSX’s auditor Deloitte Touche Tohmatsu and underwriters including Deutsche Bank, Goldman Sachs, Bank of America, and Credit Suisse have apparently failed to perform basic due diligence on their client – otherwise they should have easily detected at least some of the major red flags we outline in this report."

Grizzly Research: Brushed Student Counts and Cooked Books  - Feb 25, 2020

GSX Techedu:  GSX 2019 Q4 Earnings Release   - Feb18, 2020
GSX Techedu:  Prospectus - Nov. 2019