BEIJING, May 19, 2020 /PRNewswire/ -- GSX Techedu Inc.
(NYSE: GSX) ("GSX" or the "Company"), a leading online K-12
large-class after-school tutoring service provider in China,
today refuted the false allegations in Muddy Waters Research's
latest report, dated May 18, 2020. The Company respects Muddy
Waters' efforts. However, after analyzing the report, the Company
believes that Muddy Waters lacks a basic understanding of GSX's
The Company's management regrets to see confusion in the market
and will continue to use its best efforts to ensure that investors
fully understand all aspects of the business. The Company would
like to respond to some of the specific allegations:
1. Precise Joiners, Burst Joiners and Early Joiners
GSX's business, which focuses on online
live large classes, splits a large class with one instructor
into smaller groups with multiple tutors. Burst joiners are caused
when classes transition from tutors to instructors, which is a
typical course procedure. Typically, a tutor offers a prep session
before a paid class to warm up students with games and quizzes.
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. If a tutor fails to do so in time,
the system will automatically switch classes for students, usually
around the class start times, thus causing large groups of users to
join classes at the same time.
Precise joiners exist for the same reason, especially with
respect to K-12 classes, which are typically delivered
periodically. Early joiners are students who sign in early to
participate in the tutor's prep sessions.
2. GSX IP Joiners
GSX reproduced the full dataset for all of the Company's paid
classes between January and March
2020, and concluded that the IP overlap rate between
students, instructors and tutors was only 0.78%, far less than the
28.2% claimed in the report. We believe that a 0.78% overlap is a
3. Chairman Larry Xiangdong
Chen's Share Pledge
On April 7, 2020, Larry received a
margin loan of US$50 million by
pledging an immaterial proportion of his GSX shares.
The 9 million ADRs mentioned in Muddy Waters' report were not
the actual pledged amount, but a total deposit amount by Larry
through the pledging process, since he was not able to retrieve and
split the physical stock certificate from the United States due to the COVID-19
4. Remarks in the Report
The remarks in the report allege
that Weishi and Beijing Youlian provided bot users to GSX.
Firstly, Weishi is a GSX-owned and consolidated online live
broadcasting vendor. All of its transactions are properly recorded.
Transactions within GSX are eliminated during the preparation of
GSX's consolidated financial statements. In short, GSX cannot
inflate net revenues through internal transactions. The allegation
Secondly, transactions with
Beijing Youlian have been
fully disclosed in the Company's annual filings. The transactions
were negligible and accounted for 0.025% of GSX's net revenues in
the first quarter of 2020.
Lastly, GSX's current business is completely different from online-to-offline model.
The Company focuses entirely on online
live large classes, and has been profitable with positive
operating cash flow and increasing cash and cash equivalents,
short-term and long-term investments since IPO. The short report
does not reflect the Company's current business situation.
As always, GSX is committed to maintaining the highest standards
of corporate governance, as well as transparent and timely
disclosure in compliance with the applicable rules and regulations
of the SEC and the NYSE. The Company remains focused on further
developing its business, better serving its students, and creating
value for shareholders over the long term.
Safe Harbor Statement
This announcement contains forward-looking statements. These
statements are made under the "safe harbor" provisions of the U.S.
Private Securities Litigation Reform Act of 1995. These
forward-looking statements can be identified by terminology such as
"will," "expects," "anticipates," "future," "intends," "plans,"
"believes," "estimates" and similar statements. GSX may also make
written or oral forward-looking statements in its reports filed
with, or furnished to, the U.S. Securities and Exchange Commission,
in its annual reports to shareholders, in press releases and other
written materials and in oral statements made by its officers,
directors or employees to third parties. Statements that are not
historical facts, including statements about the Company's beliefs
and expectations, are forward-looking statements. Forward-looking
statements involve inherent risks and uncertainties. A number of
factors could cause actual results to differ materially from those
contained in any forward-looking statement. Further information
regarding these and other risks is included in the Company's
reports filed with, or furnished to the U.S. Securities and
Exchange Commission. All information provided in this press release
and in the attachments is as of the date of this press release, and
GSX undertakes no duty to update such information or any
forward-looking statement, except as required under applicable
GSX is a technology-driven education company and leading online
K-12 large-class after-school tutoring service provider
in China. GSX offers K-12 courses covering all primary and
secondary grades as well as foreign language, professional and
interest courses. GSX 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. Big data
analytics permeates each aspect of the Company's business and
facilitates the application of the latest technology to improve
teaching delivery, student learning experience, and operational
For further information, please contact:
GSX Techedu Inc.
Ms. Sandy Qin, CFA
Mr. Christian Arnell
Ms. Linda Bergkamp
SOURCE GSX Techedu Inc.