A Chinese online tutoring company under investigation in the US over fraud allegations has announced that “certain investors” have agreed to purchase $870 million of newly issued shares through a private placemen

New York-listed GSX Techedu, which is being probed by the US Securities and Exchange Commission (SEC) after several prominent short-sellers this year accused it of accounting fraud, said the new shares will represent around 6.2% of total outstanding shares.

The placement, investors behind which are unidentified, is expected to close this month.

GSX Techedu’s share price climbed 13% following the announcement.

Muddy Waters Research, a short-seller renowned for taking down fraudulent Chinse companies which earlier this year called GSX Techedu a “near-total fraud” in a scathing report, took to Twitter to raise questions over the legitimacy of the placement.

Carson Block, founder of Muddy Waters Research, tweeted from the company’s official account: “IF the placement is actually real, cannot imagine the buyers doing this w/o [without] having been seriously short beforehand. But who are the buyers? Who would step up and write a check [sic] for the biggest and most obvious stock fraud in the world? And why?”

In September, GSX Techedu – which has consistently denied allegations against it – confirmed it was under investigation by the SEC over accusations of fraud by more than a dozen short-sellers.

VIPKid, a rival to GSX Techedu, has sued the organisation for intellectual property theft in a Chinese court.

GSX Techedu floated last June at $10 a share. Earlier this year, in October, its share price hit an all-time high of $114.55 before falling to $64.82 today.

Date published: 10 December 2020

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