Shares of four education giants plunge, Good Future market value evaporates 24 billion

Recently, the U.S. stocks of China’s four largest education and training giants plunged across the board. During the week, education company Good Future’s market value evaporated more than 24 billion RMB.

On May 21 EST, shares of Good Future, New Oriental, Heilongren and NetEase Youdao closed down 5.53%, 10.45%, 11.92% and 6.42%, respectively.

During the week, shares of Good Future, New Oriental, and Who’s Who fell 11.92%, 9.09%, and 4.75%, respectively, and their market caps shrank by 24.215 billion yuan, 12.29 billion yuan, and 1.792 billion yuan, respectively, making them the top three companies in terms of share price and market cap this week.

Huaxia Times reported that on the 18th of this week, NetEase released its Q1 FY2021 earnings report, achieving net income of 1.340 billion yuan, up 147.5% year-on-year, but net loss attributable to the mother company was 326 million yuan, further increasing compared to the same period last year.

In addition, Palm Education filed a prospectus this week to go public in the United States. From the prospectus filed, Palm Education is still in a net loss position, and although the loss has narrowed compared to 2019, the company still has a net loss of 1.012 billion yuan as of December 31, 2020; like many education companies, Palm Education’s marketing expenses have also become an important reason for the loss, reaching 2.577 billion yuan in 2020, which is still an increase compared to 2019.

Recently, U.S. regulators have issued requirements for foreign companies led by Chinese stocks that must comply with U.S. auditor policies, and companies that do not meet the requirements will be removed from the U.S. stock market. The policy has led to a plunge in Chinese stocks, which has been further driven by international institutions selling off their stocks.

On May 13, the U.S. Public Company Accounting Oversight Board (PCAOB) launched a request for comments on how to determine the “failure to effectively exercise accounting supervision” under the Foreign Company Accountability Act. After the news came out, Chinese stocks plunged, with New Oriental down 14.42% and NetEase Youdao down 10.55%.

In addition, some U.S. investment institutions have been questioning the financial falsification of Who Study. As of April 1, Heilongxue’s stock price had suffered a rare and embarrassing “11-game losing streak” in its history, falling from $149 to $32. Its market value fell from $38 billion to $8.2 billion, evaporating nearly $30 billion (about 196 billion yuan).

On Jan. 23 this year, the Chinese Communist Party authorities called a halt to offline training institutions. On March 10, shares of New Oriental, Good Future and Who’s Who plunged, with New Oriental down more than 14 percent and Good Future down more than 11 percent. The combined market value of the three education giants evaporated tens of billions of yuan.

On April 25, the Beijing Municipal Bureau of Market Supervision released news that four out-of-school education training institutions, including New Oriental Online, had price violations and were given warnings and top fines of 500,000 yuan.

On May 18 and 19, 12 out-of-school training institutions, including New Oriental, Longwen Education and Shuhua Fine Arts, were found by CPC officials to be suspected of false and illegal advertisements and other problems, and market regulators opened a case for investigation.