US short-seller Citron Research has accused Chinese online tutoring company GSX of defrauding investors by inflating its 2019 revenue up to 70%, sending the company’s share prices down in Tuesday trading.

Why it matters: The Beijing-based edtech upstart is the latest US-listed Chinese firm facing close scrutiny in the wake of a fraud disclosure by beverage chain Luckin and online education peer TAL.

  • Short sellers have also set their sights on Chinese video-streaming platform Iqiyi and classifieds site
  • Citron’s report comes two months after short-seller Grizzly Report accused GSX of faking sales and financials by order “brushing” and overstating its net profit in 2018 by 74.6%.
  • China’s online education industry is bearing the brunt (in Chinese) of the blow, with shares for New Oriental, GSX, Netease’s Youdao, and Liulishuo declining after NYSE-listed TAL disclosed fraudulently inflated sales from one if its business units.

Read more: US-listed Chinese firms are on thin ice

Details: Citron Research calls GSX “the most blatant Chinese stock fraud since 2011” and asks that trading of its shares be halted and for an immediate internal investigation in a report published on Tuesday.

  • GSX’s revenue surged 431% year on year to $2.11 billion in 2019 from $397 million in 2018, according to the company. Citron Research said in its report that it believes the growth is vastly inflated.
  • GSX, which claims in its prospectus to be the third-largest online K-12 after-school tutoring service in China in terms of gross billings in 2018, is absent from a group market share reports conducted by the government, media, and third-party think tanks, according to the Citron Research report.
  • Chen Xiangdong, GSX founder and CEO, denied the fraud accusations in response to former fraud concerns. “Integrity is the most precious element in our value system since the first day of GSX,” he said in a Weibo posting on April 8.
  • GSX shares plunged around 12% mid-day before closing down 0.6% on Tuesday.
  • Citron’s report has attracted attention from law firms including Atlanta, Ga.-based Holzer and Holzer LLC which are launching investigations.

Context: Founded in 2014, GSX is an online education platform targeting K-12 after-school tutoring services in a large class format.

  • The company went public on the NYSE in June to raise $208 million at the mid-point of its targeted range at $10.5 a share.

Emma Lee (Li Xin) was TechNode's e-commerce and new retail reporter until June 2022, when she moved to Sixth Tone to cover technology and consumption. Get in touch with her via or Twitter.