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GSX Techedu Inc. Class Action Lawsuit

Case Summary

Company Name
GSX Techedu Inc.
Stock Symbol
GSX
Class Period
June 6, 2019 to April 13, 2020
Court
District of New Jersey

The GSX Techedu Inc. securities class action lawsuit charges GSX Techedu and certain of its officers with violations of the Securities Exchange Act of 1934 and seeks to represent purchasers of GSX Techedu securities between June 6, 2019 and April 13, 2020 (the “Class Period”).  The GSX Techedu securities class action lawsuit was commenced on April 17, 2020 in the District of New Jersey and is captioned Wu v. GSX Techedu Inc., No. 20-cv-04457.

GSX Techedu is a technology-driven education company that provides online K-12 after-school tutoring services in China.  GSX Techedu also provides a variety of other tutoring courses and services, such as English courses for children in kindergarten, foreign language courses, English test preparation courses for students taking post-graduate entrance exams, professional courses for working adults preparing for professional qualification exams, personal interest courses, and offline business consulting courses.  Additionally, GSX Techedu operates Weishi, an interactive learning platform on the popular Chinese digital application WeChat.

The GSX Techedu securities class action lawsuit alleges that throughout the Class Period, defendants made false and/or misleading statements and/or failed to disclose that: (i) GSX Techedu overstated its profitability, revenue, student enrollment figures, teacher qualifications, and teacher selection process; (ii) the foregoing, once revealed, was foreseeably likely to have a material negative impact on GSX Techedu’s financial results; and (iii) as a result, GSX Techedu’s public statements were materially false and misleading at all relevant times.

On February 25, 2020, Grizzly Research LLC published a report highlighting multiple alleged issues with GSX Techedu’s business and financial operations.  Specifically, the Grizzly Research report alleged, among other things, that GSX Techedu “has been drastically overstating its profitability in its US public filings, especially for 2018”; Grizzly Research “found multiple strong indications of past and current order ‘brushing,’” which is “essentially fak[ing] student enrollments to boost student count”; “many of GSX [Techedu]’s reported students d[id] not actually exist”; and “[w]hile [GSX Techedu] touts its high-quality teacher recruitment mechanism, [Grizzly Research] found a sign-up website that was not functional, multiple allegations of GSX [Techedu] hiring teachers right out of college with no prior experience, and fabricated teachers profiles.”  Following publication of Grizzly Research’s report, the price of GSX Techedu American Depositary Shares (“ADSs”) declined to close at $44.09 per share on February 25, 2020.

Then, on April 14, 2020, Citron Research published a report highlighting additional alleged issues with GSX Techedu’s business and financial operations, including, among other things, that GSX Techedu’s “2019 revenue was overstated by 70%,” that “sales revenues [were] largely exaggerated,” and that GSX Techedu’s “filings [were] riddled with suspicious transactions.”  Following publication of the Citron report, the price of GSX Techedu ADSs again fell, closing at $31.20 per share on April 14, 2020 – a total decline of more than 30% from the time the truth concerning GSX Techedu’s alleged fraud began to emerge.

Robbins Geller Rudman & Dowd LLP is one of the world’s leading law firms representing investors in securities class action litigation.  With 200 lawyers in 9 offices, Robbins Geller has obtained many of the largest securities class action recoveries in history.  For seven consecutive years, ISS Securities Class Action Services has ranked the Firm in its annual SCAS Top 50 Report as one of the top law firms in the world in both amount recovered for shareholders and total number of class action settlements.  Robbins Geller attorneys have helped shape the securities laws and have recovered tens of billions of dollars on behalf of aggrieved victims.  Beyond securing financial recoveries for defrauded investors, Robbins Geller also specializes in implementing corporate governance reforms, helping to improve the financial markets for investors worldwide.  Robbins Geller attorneys are consistently recognized by courts, professional organizations and the media as leading lawyers in the industry.

Class Period: June 6, 2019 - April 13, 2020
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