Traders: short this poorly-scoring online tutoring firm

Even if short-sellers’ suspicions are wrong, GSX Techedu is too expensive

People learning on a laptop
The shares are absurdly expensive on 409 times trailing earnings © iStockphoto
(Image credit: © Getty Images/iStockphoto)

The rally in US equities, with the benchmark S&P 500 index now up 40% from its low in mid-March, has left many stocks trading only slightly below their level at the start of this year. However, some technology shares have surged by even more as investors think that the crisis could lead to many activities traditionally carried out face-to-face being conducted online instead.

One of these is GSX Techedu Inc (NYSE: GSX), a Chinese company that specialises in after-school online tutoring. A year ago the shares were trading at barely $10. However, by January they had risen to more than $23. They are currently at $66: a 750% rise in a single year. But the firm’s meteoric rise, which follows the implosion of Chinese companies such as Luckin Coffee, has attracted attention from short-sellers, who have argued that things are not quite what they seem.

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Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri