The share price of New Oriental Education on the Hong Kong Stock Exchange on Friday afternoon has suddenly slumped. As of 4:10 pm, its was selling at HK $30.60 per share – down 39.63% – hitting a new low since its Hong Kong debut. Its latest market valuation sits at HK $55.541 billion.
Insiders speculated that the cause of the falling stock price is a notice issued on July 20 by China’s State Council entitled Opinions on Further Reducing Students’ Homework Burden and Off-campus Training Burden in Compulsory Education Stage. The document mentioned that discipline training institutions are not allowed to go public or receive investment from listed companies for financing, while capitalization operation is strictly prohibited. Listed companies shall not purchase assets of those institutions by issuing shares or paying cash.
As a famous private off-campus training institution in China, New Oriental Education was successfully listed on the New York Stock Exchange on September 7, 2006, then went through a second listing on the Hong Kong Stock Exchange on November 9, 2020. As of November 30, 2020, the Beijing-based company had set up 117 branches, 12 bookstores and 1,518 learning centers in 103 cities across the country, with a staff of more than 45,700 teachers.
This 28-year-old company now faces many competitors, such as Zuoyebang, Yuanfudao, ByteDance’s Dali Education, VIPkid and so on. During this summer break, typically the busiest period for education companies to engage in fierce battles for students, both online and offline institutions have received less customers because of government supervision.