A famed short-seller explains why he's betting big against a Chinese tech stock that has seen a 'crazy stupid' 320% gain in 2020
- Famed short-seller
Andrew Leftis shorting the stock of Chinese online education provider GSX Techedu.
- Left told Business Insider that he thinks the company is exaggerating its profitability, and will ultimately be delisted by the New York Stock Exchange
- "The company is crazy stupid. If you believe their financials, then you believe that they've created probably the greatest company that's ever been created since early stage Google," he said.
- GSX Techedu's stock is up 320% in 2020.
- The company has been attacked by a number of short-sellers in recent months, including Carson Block's research firm Muddy Waters, which alleged that the majority of its users are fake.
- Business Insider contacted GSX Techedu for comment, but the company did not respond.
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Famed short-seller Andrew Left is aggressively shorting a "crazy stupid" Chinese stock that has gained more than 320% on the New York Stock exchange in 2020, as he believes it has exaggerated its earnings and will eventually be delisted.
The activist short-seller and founder of Citron Capital, told Business Insider that he believes that the earnings of GSX Techedu are grossly inflated "anywhere between 50 to 80%."
GSX, which is an online education provider, has surged despite a number of claims by various short-sellers casting doubt on the company's performance.
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Left said: "The company is crazy stupid. If you believe their financials, then you believe that they've created probably the greatest company that's ever been created since early stage Google. Like they're growing 350% and they're doing it profitably. It's just impossible."
He said that despite the company's explosive stock market growth, it is "not even spoken about in China," even though it has a market capitalization of over $20 billion on the New York Stock Exchange.
Left likened the company's performance to Tesla's stock surge, but without actually seeing any "Teslas on the road."
The education provider went public on the New York Stock Exchange in June 2019. Shares were initially priced at $10.50. The stock is currently hovering around $90.
The stock has come under fire by a number of reputed short sellers.
Famed short-seller Carson Block and his firm Muddy Waters Research claimed in a May report that at least 70% of the company's users are fake.
"We are short GSX because we conclude that it is a near-total fraud," the firm's research note said.
Despite the claims, the stock continued to climb and touched a high of $120 on August 8.
Business Insider contacted GSX Techedu for comment, but the company did not respond.
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"Eventually the stock price will go to zero because it'll get delisted. The auditors will tell them we have to redo your financials," Left said.
"GSX will be the next Luckin Coffee," he predicts.
Employees at Starbucks rival Luckin Coffee fabricated hundreds of millions of dollars worth of coffee orders last year, according to an internal investigation. That led to the stock being delisted from the Nasdaq exchange in late June.
The Trump administration announced earlier this month it is looking to ban Chinese companies with shares traded on US stock exchanges unless they comply with American accounting requirements.
Left said: "The question is the White House says we want to eliminate Chinese stock fraud. What have they done? Is this an investigation? Is it not an investigation?"
Left added that he is long on Amazon shares.
"You know, if we get a vaccine tomorrow, does everything change? You know, you don't know. But when lose or draw, I want to own Amazon," he added.
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