Market Overview

Absaroka Capital Bearish On Global Education & Technology Group


Shares of China's Global Education & Technology Group (Nasdaq: GEDU), the provider of foreign language training and test preparation services, are slightly higher today, but Absaroka Capital Management believes recent allegations by the SEC against Global Education's management regarding possible insider trading are not fully reflected in the stock price.

U.K.-based Pearson (NYSE: PSO) said on November 21 it would acquire the Chinese company for $294 million, or $11 a share, more than double the previous day's closing price.

“Specifically, the SEC criminal complain alleges Mrs. Zhang Xiadong, the company's chairwoman, and wife of Mr. Zhang Yonqi, the company's CEO, wired money to Ms. Wang Lili to fund her acquisition of GEDU shares prior to the public announcement of the Pearson acquisition agreement. This fact-pattern strongly indicates GEDU's Management Team acted with scienter and malice to facilitate illegal trading based on material, non-public information,” Absaroka Capital said. Full text of the Absaroka Capital report can be viewed here.

Absaroka went on to say the premium being offered and the “allegedly illegal pattern of behavior by GEDU's management team” warrants immediate attention by Pearson's board.

Absaroka said a short position in GEDU “represents a highly compelling risk-reward proposition at this time.”


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