China-based edtech company GSX Techedu(NYSE: GSX) changed its name to Gaotu Group(高途集团) on April 22. And its ticker symbol on the New York Stock Exchange will be changed.
“A great teacher produces a brilliant student ". In this sentence, “a brilliant student" could be called gaotu(高徒) in Chinese, although Chinese people pronounce the two words(高徒 and 高途) in the same way, the latter one means “road to achievement".
Last October, all of GSX Techedu's K-12 online tutoring businesses were integrated into Gaotu Class(高途课堂). And as the company adopts a new name, its online school for adults, which previously used the brand name Genshuixue to Gaotu Xueyuan(高途学院, meaning Academy or College).
From Genshuixue(跟谁学, meaning “learn from whom"), a simple question, to Gaotu(高途), a brand with good wishes, however, the fate of the company depends more on whether the decision is conducive to business growth.
A new name could also create some brand separation from some of the bad news associated with the company in the past. “The secondary market has attached overdone focus on GSX in 2020.” Gaotu Group’s words seemed to hint at some connection between the short-selling and name change. “The audited financial report will be released soon. Gaotu will unfold a new chapter and go forward with the burdens discarded.
In February 2020, Grizzly Research published a 59-page report, alleging that the management team behind GSX has committed securities fraud through false SEC filings, that the company is offloading expenses in off-balance sheet arrangements, and that of fake student enrollment to boost figures. After this, GSX has faced more than a dozen allegations from Grizzly Research, Citron Research, Scorpio VC, and Muddy Waters.
This March, GSX updated that based on the agreed-upon scope and procedures performed, the Internal Review did not uncover evidence that would have a material impact on GSX’s previously reported financial statements. Meanwhile, GSX would continue to cooperate with the SEC in connection with the ongoing SEC investigation.
On April 9th, Grizzly Research released its third short-selling report on GSX regarding fake cash flow and fraudulent teacher certificates. This is the 16th accusation faced by GSX since it went public in 2019.
Citron pointed out in its report published in April 2020 that GSX inflated its 2019 revenue up to 70%. In response, GSX claimed that Citron's conclusions only took the GSX brand as the research object, without mentioning Gaotu Class which has contributed most revenues to its K-12 business.
In November 2016, GSX pioneered to provide live-streaming large-sized courses, and Gaotu Class debuted, and it has become an essential profit pillar of GSX at the current stage. As all of GSX Techedu's K-12 online tutoring businesses were integrated into Gaotu Class, GSX has already been replaced by Gaotu in terms of revenue contribution and market visibility.
Thus, what's more important is that name changing could help GSX to solve problems caused by brand fragmentation and save marketing expenses. According to its unaudited financial report for the fourth quarter and the whole year ended December 31, 2020, the net income for the whole year was RMB7.13 billion, a year-on-year increase of 236.9%, the net loss was RMB1.39 billion yuan, compared to a net profit of RMB227 million, over the same period. As for the reason, high marketing expenses made GSX turn from profit to loss.
At the press conference, Gaotu Group also revealed new layouts: (1)launching Gaotu Singularity Research Institute to empower teachers, teaching and research and content service ecology, (2)exploring "local online course" to provide students in different regions with tutoring services following local teaching materials, examination requirements, and policies.
Besides, Gaotu Group's adult education business brand Gaotu Xueyuan aims to rank the first in its track. Now, its offerings include language training, financial literacy, public examinations, business management, studying abroad, etc.
Education companies are facing a pivotal period in adjusting their business plan to achieve better growth under the new normal after COVID-19. Becoming Gaotu to bid farewell to the past, GSX is ready to serve users in the whole life cycle better. But, could GSX bail out itself in this way? Only time will tell.