Mystery Block Trade Erases $3 Billion From GSX Founder’s Fortune

Larry Chen, founder and chairman of GSX Techedu Inc., lost $3.1 billion overnight as American depositary receipts of his online education company tumbled amid a barrage of block trades in some giant Chinese and U.S. companies.

Shares in the Chinese firm plunged 42% on Friday after Morgan Stanley managed the trade, according to a person familiar with the matter. Chen’s net worth dropped to $4.2 billion, knocking him from the Bloomberg Billionaires Index ranking of the richest 500 people globally.

Goldman Sachs Group Inc. and Morgan Stanley also pitched offerings in Chinese giants Baidu Inc., Tencent Music Entertainment Group and Vipshop Holdings Ltd., as well as U.S. firms such as Discovery Inc. Some of the trades exceeded $1 billion in individual companies, calculations based on Bloomberg data show.

The sales triggered price swings for every stock involved in the high-volume transactions, while rattling some of their industry counterparts. It also spurred speculation among some traders of forced selling by a fund being liquidated.

In the case of GSX, a block of 12.8 million shares was offered at a discount to a reference price of $49.50 -- already below the closing price on Thursday. The stock closed at $39.01, hammering GSX’s largest shareholders, including Chen.

Chen’s fortunes have swung wildly since GSX’s American depositary receipts began trading in June 2019. The after-school tutoring company soared initially but was slammed by short sellers including Muddy Waters, which said many of the firm’s users are robots. GSX withstood the attacks, but then tumbled again in October after Credit Suisse Group AG downgraded the stock, arguing that the company faced increased competition.

Chen, who was born in a poor village in northern China, was at one point worth more than $15 billion. He started his career as a middle school teacher at 17 and joined New Oriental Education & Technology Group Inc. in 1999, eventually becoming executive president before leaving to start GSX in 2014.

©2021 Bloomberg L.P.

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