(Yicai Global) Dec. 7 -- GSX Techedu will raise USD870 million through a private placement of newly issued shares, the Chinese online educator said today, just a few days after announcing its first deficit since listing in New York last June.

The new shares issued amount to 6.2 percent of the company’s total stock, Beijing-based GSX said. The deal is expected to be concluded this month, it added, without giving any details about the investors.

The company posted a huge loss of CNY933 million (USD142.7 million) in the third quarter, blaming it on a three-and-a-half-fold jump in operating expenses, particularly marketing costs over the summer break.

The extra funds will go towards padding the company’s cash reserves and boosting spending on its K-12, or kindergarten through 12th grade, business, tech site 36Kr reported. This will make the platform more attractive to good teachers and enhance students' learning experience, it added.

However, there are those who point out the online teaching sector is not yet self-sustaining.

While the Covid-19 pandemic has fueled explosive demand for online education, the sector still relies entirely on capital injection and has yet to come up with a sustainable business model, Michael Yu, founder of leading educational services provider New Oriental Education and Technology Group, said last month.

Nearly USD15 billion flowed into the sector this year, but it only logged revenue of tens of billions of yuan – single-digit billions of US dollars – according to data Yu provided.

GSX, whose stock has seen a six-fold increase since going public and has amassed a market capitalization of USD14.5 billion, has been plagued by short selling reports, 15 so far this year, accusing it of inflated revenues and exaggerated profits. GSX has denied all accusations.

GSX’s shares [NYSE:GSX] closed down 0.77 percent at USD60.73 each on Dec. 4.

Editor: Kim Taylor