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Despite short attacks, GSX becomes China’s second largest K-12 education company by market cap

the edtech firm’s share price has more than doubled since it got its first short report in February.

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Beijing-based online education platform GSX Techedu (NYSE: GSX) advanced 9.5% to close at USD 97.59 on Monday, bringing its market capitalization to USD 23.3 billion.

The rise has allowed GSX to top its rival New Oriental (NYSE: EDU), whose market cap reached USD 22.7 billion on Monday, and now lag only behind TAL Education (NYSE: TAL).

Since its first short report on February 25 by Grizzly Research, the share price of GSX—founded in 2014 by Chen Xiangdong, former executive president of New Oriental—has more than doubled. And it was hardly the only one; GSX got nine short reports from due diligence firms including Citron Research by June 2, which stated that the company had falsified its financials.

The company was also brought to court by VIPKid for alleged trade secret thefts, KrASIA reported in April.

The company, which features large-class live-streamed courses for students from kindergarten to college, collected RMB 1.3 billion (USD 183.3 million) in revenue in the first quarter of this year, up 382% year-on-year (YoY), mainly boosted by its core K-12 business, according to earnings released on May 6. GSX generated RMB 148 million (USD 21.2 million) in net income, up 336.6% YoY.

Chen, chairman and CEO of GSX, revealed in the release that paid users grew by 307% YoY to 774,000 in the first quarter.

The strong business performance could have lured investors who are betting in China’s online education sector amid the COVID-19 pandemic when brick-and-mortar training centers are all forced to shut down, 36Kr wrote, citing unnamed analysts.

Another possible reason behind the stock rally of GSX could be attributed to short sellers, as they might have been purchasing shares to return to brokers, 36Kr added.

GSX’s prices have seen a bull run, which is contrary to what short sellers once expected and could mean indefinite risks for them if the upward trend continues.