On March 30th, China-based online K-12 after-school tutoring service provider GSX Techedu announced that Larry Xiangdong Chen, GSX’s founder, Chairman, and CEO, intends to use his personal funds to purchase up to US$50 million of the company’s shares over the next 12 months.
Currently, he has not pledged any of his equity interest in the Company as security or collateral to any third party.
In May 2020, GSX’s board of directors had authorized a share repurchase program, under which the company may repurchase up to US$150 million of its shares, effective until May 6th, 2022.
To date, the company had repurchased US$39.8 million of its shares under the program. GSX is still authorized to use the remaining quota for repurchase within the term of the plan.
Chen has issued an internal letter on March 29th, stating that he would give the employees whose compensation package includes stocks a minimum price guarantee in the next two years.
Meanwhile, taking into account the current stock price and confidence in the future, eligible employees are allowed to exchange part of their compensation for four-year vesting.
Chen also mentioned that the big hit of GSX’s stock price on March 26th was probably due to the Chinese government’s upcoming restrictions on online education in terms of K-12 students and worries about China-U.S. relations. “But the most important factor should be an American hedge fund’s(Archegos) blow-up.”
Looking back to GSX’s latest financial results, the company’s revenues totaled over RMB2.2 billion in Q4 2020, an increase of 136.5% year-on-year. For the whole year, net revenues were RMB7.125 billion, an increase of 236.9% year-on-year, while the net loss was RMB1.393 million, compared with net income of RMB226.6 million in 2019.