Pomerantz LLP Appointed Lead Counsel in GSX Techedu, Inc. Securities Litigation

On August 26, 2020, U.S. District Judge Cathy L. Waldor of the District of New Jersey appointed Pomerantz LLP as Lead Counsel on behalf of Lead Plaintiff Yang Renbin in Wu v. GSX Techedu Inc. et al (No. 2:20-cv-04457 (D.N.J.)), a securities litigation class action.

GSX Techedu Inc. (“GSX” or the Company”) is a technology-driven education company that provides online K- 12 after-school tutoring services in China, along with a variety of other tutoring, test preparation and professional qualification courses and services for students and working adults. Additionally, the Company operates Weishi, an interactive learning platform on the popular Chinese digital application WeChat.

Specifically, the complaint alleges that, between June 6, 2019 and April 13, 2020, GSX failed to disclose that: (i) GSX overstated its profitability, revenue, student enrollment figures, teacher qualifications and teacher selection process; and (ii) as a result, the foregoing, once revealed, was foreseeably likely to have a material, negative impact on the Company’s financial results.

On February 25, 2020, when Grizzly Research (“Grizzly”), an investment research firm that focuses on publicly traded companies, published a report alleging multiple issues with GSX’s business and financial operations. The report alleged that GSX “has been drastically overstating its profitability in its US public filings, especially for 2018.” Grizzly “found multiple strong indications of past and current order ‘brushing,’” which are “essentially fake student enrollments to boost student count.” Grizzly went on to claim that “many of GSX’s reported students do not actually exist.” On this news, GSX’s share price fell $1.33 per share, or approximately 3%, to close at $44.09 on February 25, 2020.

Then, on April 14, 2020, Citron Research (“Citron”), an online investment newsletter and research firm, reported that GSX’s “2019 revenue was overstated by 70%,” and alleged that “most students are not from lower-tier cities, as GSX claims, when trying to explain how the company can grow so quickly when most Chinese parents in Tier 1 and 2 cities have never heard of them.” On this news, GSX’s share price fell a further $0.20 per share, or 0.64%, to close at $31.20 per share on April 14, 2020.

This securities litigation seeks to recover damages caused by GSX’s violations of the federal securities laws and to pursue remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, against the Company and certain of its top officials.

Pomerantz’s litigation team is led by Managing Partner Jeremy A. Lieberman.