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Citron Calls GSX Techedu 'Most Blatant Chinese Stock Fraud Since 2011,' Company Says Report False

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Citron Calls GSX Techedu 'Most Blatant Chinese Stock Fraud Since 2011,' Company Says Report False

Shares of the China-based, online after-school tutoring service provider GSX Techedu Inc (NYSE: GSX) have come under selling pressure ever since the disclosure of financial improprieties by coffee retail chain Luckin Coffee Inc – ADR (NASDAQ: LK).

GSX shares are coming under renewed selling pressure after short seller Citron said it's the most blatant Chinese stock fraud since 2011.

In a tweet Tuesday, Citron said the GSX story is too good to be true and that about 70% of its revenues are fabricated.

The short seller went a step further and called on GSX's internal audit team to look into enrollment numbers and revenue more closely, given the short seller's research, which it said unearthed a huge discrepancy between reported figures and reality.

GSX firmly denied Citron's allegations and said they're false and ungrounded in a Wednesday press release. 

"The company strongly believes that the report contains numerous errors, unsubstantiated statements, and misinterpretation of information," GSX said. 

The Citron report misrepresented facts by stating the company's entire revenues from K-12 courses come from Genshuixue, when in fact GSX has two K-12 live large course brands, Gaotu and Genshuixue, the company said. 

The company said it is contemplating necessary and appropriate courses of action to protect stakeholders, and said it strives to provide full and accurate disclosure to investors.

GSX said it's "maintaining the highest standards of corporate governance, as well as transparent and timely disclosure in compliance with the applicable rules and regulations."

At last check, GSX shares were slipping 3.81% to $30.01.

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