What’s Going on with New Oriental Education & Technology Group Inc.?
New Oriental Education & Technology Group Inc. (EDU) — the biggest provider of private educational services in China — published an update on new regulations recently put forth by the Chinese government related to after-school tutoring and private educational services. Last Friday, July 23, EDU stock tumbled 54.22%, closing at $2.93 a share. This morning, pre-market, EDU stock was trading at $2.21 a share, which is a further 24.57% decline.
What Does This Mean for EDU?
Similar to other companies in China’s private education and tutoring industry (like Gaotu Techedu Inc.), New Oriental Education & Technology Group Inc. is in the midst of a huge shake-up. One of the Chinese government’s official reasons for this overhaul is to ease the financial burdens parents face raising children in China.
The General Office of the Communist Party of China Central Committee, along with the General Office of the State Council, has mandated that institutions offering tuition covering school curriculum must now be registered as non-profit organizations. Furthermore, registered Academic AST (After-School Tutoring) Institutions will have to adhere to government approval-based curriculum regimes, refrain from using foreign capital investments and ban foreign ownership.
In its update, New Oriental Education & Technology Group Inc. stated, “The Company [EDU] will follow the spirit of the Opinion [new governmental private education regulations] and comply with relevant rules and regulations when providing educational services. The Company is considering appropriate compliance measures to be taken, and expects such measures to have material adverse impact on its after-school tutoring services related to academic subjects in China's compulsory education system.”
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EDU, founded in 1993, is the largest well-established one-stop shopping private educational services provider in China. EDU has had over 52.8 million student enrollments, including about 8.4 million enrollments in fiscal 2019. As of third-quarter fiscal 2020, EDU had a network of 1,416 learning centers, including 99 schools, 12 bookstores and access to a national network of online and offline bookstores through 160 third-party distributors and over 38,400 highly qualified teachers in 86 cities. EDU offers a diversified portfolio of educational programs, services and products to students in different age groups, including K-12 after-school tutoring for major academic subjects, overseas and domestic test preparations, nonacademic languages and services in vocational training, and so on.