GSX Techedu IPO: What You Need To Know About The Chinese Education Company

Joining the bandwagon of Chinese issues making a beeline to the U.S. market is GSX Techedu, an online education company.

The IPO Terms

GSX Techedu proposes to offer 19.8 million ADSs, with every three ADS representing two of its Class A ordinary shares, according to its amended F-1 filing. The ADSs are estimated to be priced in the range of $9.50-$11.50 per ADS.

The ADSs have been approved for listing on the NYSE under the ticker symbol GSX.

At the mid-point of the price range, the offering is expected to raise gross proceeds of $207.9 million.

The company qualifies as an emerging growth company under applicable U.S. federal securities laws, and therefore is eligible for reduced public company reporting requirements.

Credit Suisse, Barclays, Deutsche Bank Securities and CLSA are the underwriters for the offering.

The Company

GSX Techedu is the third largest K-12 large-class after-school tutoring service provider in China in terms of billings, as of 2018. Its K-12 courses cover primary and secondary grades, accounting for 73 percent and 75 percent of its revenues, respectively in 2018.

"We adopted the online live large-class format to deliver our courses, which we believe is the most effective and scalable model to disseminate scarce high quality teaching resources to aspiring students in China," the company said in its F-1 filing.

Chinese online education market in terms of gross billings rose at a CAGR of 31.4 percent between 2013 and 2018, and is poised to grow at a higher CAGR of 37.2 percent to reach $101.3 billion in 2023, GSX Techedu said, citing estimates by Frost & Sullivan.

The Finances

For the fiscal year ended 2018, GSX Techedu reported $59.20 million, up 307 percent year-over-year. The company reported a profit of $2.64 million for the quarter ended March 2019.

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