Gaotu Techedu Inc (NYSE:GOTU) Stock Gains Further Momentum: But Why?

In the week leading up to yesterday, the Gaotu Techedu Inc (NYSE:GOTU) stock had been in the middle of a massive selloff and went down by as much as 80%. However, on Tuesday, the stock seemed to be on the path to recovery and managed to record gains of as much as 16%.

There was no news about the company that might have led to this recovery but it might be a good idea for investors to have a look at the reason why the stock actually tanked last week. A report in a leading financial publication last week stated that the Chinese government was looking to turn private tutoring companies into non-profit entities.

Considering the fact that Gaotu is involved in the same line of business, it led to a selloff in the stock and a sharp decline within a short period of time. The report stated that if the measures from the Chinese government did go into effect then it would bar these companies from getting listed on the stock markets or raising capital. In addition to that, foreign investment in those companies will also no longer be allowed. Hence, it was no surprise that the Gaotu stock crashed last week.

Market Reaction:

On Tuesday, GOTU stock soared 15.60% at $2.89 with more than 39.12 million shares, compared to its average volume of 10.80 million shares. The stock has moved within a range of $2.4500 – 2.9500 after opening the trade at $2.71. Over the past 52-week, the stock has been trading within a range of $2.4000 – 149.0500.