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Investors who purchased or otherwise acquired publicly traded American depositary shares of GSX Techedu Inc. (now known as Gaotu Techedu Inc.) between June 6, 2019, and Oct. 20, 2020, may be eligible to claim a cash payment from a class action settlement.
GSX Techedu Inc., Larry Xiangdong Chen and Nan Shen agreed to pay $9.5 million to settle a securities class action lawsuit alleging they violated federal securities laws by making misrepresentations and omissions about the company's enrollments and revenues. The lawsuit claimed these statements artificially inflated the price of GSX securities.
Who can file a claim?
The settlement class includes all persons and entities who purchased or otherwise acquired GSX Techedu Inc. publicly traded American depositary shares between June 6, 2019, and Oct. 20, 2020, inclusive, and suffered damages as a result. This includes those who purchased ADSs in or traceable to the company's initial public offering on or about June 6, 2019, or the secondary public offering on or about Nov. 20, 2019.
Additional details
- Both individuals and entities can be class members.
- The actual beneficial owner of the securities must submit the claim.
- Joint owners must each sign the claim form.
- Agents, executors, administrators, guardians and trustees may submit claims on behalf of others and must provide proof of authority.
- Holding GSX securities through a mutual fund alone does not make an investor a class member.
How much can class members get?
The total settlement fund is $9,500,000. The amount each class member receives depends on several factors:
- The number of valid claims submitted
- The number of GSX securities purchased or acquired during the class period
- The timing and prices of each purchase and sale
- The total recognized losses of all claimants
The settlement administrator will distribute payments on a pro rata basis according to the court-approved plan of allocation:
- The estimated average recovery before deductions for fees and expenses is approximately $0.20 per share. The estimated average recovery after deductions for fees and expenses is approximately $0.12 per share.
- Actual payments may be higher or lower depending on individual claims and the total number of valid claims.
- The settlement administrator will calculate each class member's payment based on the recognized loss amount assigned to each transaction.
- The settlement bases recognized loss amounts primarily on the difference in estimated artificial inflation at the time of purchase and at the time of sale as set forth in the plan of allocation's inflation table (pages 13-15 of the settlement notice).
- For shares sold before April 3, 2020, the recognized loss is $0.
- For shares purchased and sold between two consecutive corrective disclosure dates, the recognized loss is $0.
- For shares sold from April 3, 2020, through Oct. 20, 2020, the recognized loss is the artificial inflation at purchase minus the artificial inflation at sale.
- For shares sold from Oct. 21, 2020, through Jan. 15, 2021 (the 90-day lookback period), the recognized loss is the lesser of the artificial inflation at purchase or the purchase price minus the 90-day lookback value on the date of sale.
- For shares held as of the close of trading on Jan. 15, 2021, the recognized loss is the lesser of the artificial inflation at purchase or the purchase price minus $61.93 (the average closing price during the 90-day lookback period).
- The settlement administrator will set any recognized loss that calculates to a negative number to $0.
- If total recognized losses exceed the fund, the settlement administrator will reduce payments on a pro rata basis.
- Class members whose payment would be less than $10 will not receive a payout.
How to claim a GSX settlement payment
Class members may file a claim online or download, print and complete the PDF claim form and mail it to the settlement administrator. The claim deadline is May 30, 2026.
Settlement administrator's mailing address: GSX Securities Settlement, c/o JND Legal Administration, P.O. Box 91131, Seattle, WA 98111
Proof or documentation required to submit a claim
All class members must provide the last four digits of their Social Security number or taxpayer identification number. They must also provide purchase, acquisition and sale information, including:
- Purchases and acquisitions of GSX securities from June 6, 2019, through Jan. 15, 2021
- Sales of GSX securities from June 6, 2019, through Jan. 15, 2021
- Number of shares held as of the close of trading on Jan. 15, 2021
Class members must provide documentation to support their transactions in GSX securities. Acceptable proof includes:
- Account statements
- Transaction reports or confirmations
- Authorized statements from a broker, financial advisor, online trading platform or other financial institution
Payout options
- Physical check
$9.5 million settlement fund
The $9,500,000 settlement fund includes:
- Settlement administration costs: To be determined
- Attorneys' fees: Up to $3,163,500
- Attorneys' expenses: Up to $500,000
- Payments to eligible class members: Remainder of the fund
Important dates
- Opt-out deadline: May 28, 2026
- Deadline to file a claim: May 30, 2026
- Fairness hearing: June 4, 2026
When is the GSX securities class action settlement payout date?
The settlement administrator will issue payments after the court resolves any appeals and grants final approval of the settlement.
Why did this class action settlement happen?
The class action lawsuit alleged GSX Techedu, Larry Xiangdong Chen and Nan Shen violated federal securities laws by making misrepresentations and omissions about the company's enrollments and revenues. The plaintiffs claimed these statements artificially inflated the price of GSX securities and caused investor losses.
The defendants denied all allegations of wrongdoing but agreed to settle to avoid the risks, costs and delays of continued litigation.
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