Larry Chen, who was once a school teacher at an impoverished Chinese village and later went on to become one of the world's richest people, is on the verge of losing his billionaire status. The shares of his company, GSX Techedu Inc, has seen 88 per cent fall since January, wiping almost $14 billion from his net worth.
On Wednesday alone, Techedu's share fell 4 per cent in New York trading as Goldman Sachs downgraded the stock and cut the price target, Bloomberg reported. Chen's net worth has now declined to $1.9 billion, shows the data.
The reason behind the fall in Chen's company share has been the crackdown on the online education sector by the Chinese authorities.
The company's poor performance and the implosion of an investor, Bill Hwang's Archegos Capital Management, has added fuel to the fire.
President Xi Jinping-led government in China has increased scrutiny over the education sector as after-school tutoring has put pressure on children's wellbeing.
Amid a plunge in share value, GSX has decided to shut down its pre-school education business after the Chinese government banned kindergarten and private-tutoring schools from teaching elementary school curriculum.
The company has fired several employees -- almost a third of its staff -- as business remains muted.
Chen controls a 44 per cent stake in GSX and the latest blow came in March when Archegos imploded as the company could not meet margin calls, leading to a 56 per cent fall in GSX share in just one day.
Chen came from a humble background starting his career as a middle-school teacher. In 1999, he joined Oriental Education and Technology Group Inc 1999 and later became its president. In 2014, he started his ed-tech firm called GSX. In 2019, his company stock had risen 13 times.
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