Listed Chinese Education Firms Transfer Subject Training Businesses

Publicly listed Chinese education companies are wrapping up the last off-campus training services for compulsory subjects, so as to restructure and transform their business models, 21st Century Business Herald reported on Friday.

Recently, A-share listed company Dongguan Kingsun Optoelectronic Co., Ltd., (Dongguan Kingsun), Hong Kong-listed company Beststudy Education Group (Beststudy Edu), and U.S.-listed company China Online Education Group (51Talk) have announced that they will transfer their curriculum-based training assets at the price of 1 yuan or 1 U.S. dollar. Meanwhile, 51Talk‘s main online English tutor business for teenagers has been closed, but their AI Enlightenment courses and adult English services are still available in China. It is worth noting that 51Talk has been making profits for several consecutive quarters. According to a financial report released on March 24, the company’s net profit in 2021 was 106 million yuan ($16.7 million).

According to China’s so-called “Double Reduction” policy, curriculum-based training institutions are not allowed to go public for financing, and capitalization operation is strictly prohibited. A listed firm insider said, “The company’s business needs to be transformed. If the non-compliant businesses are not divested, it is difficult for new businesses to finance.”

After divesting their original businesses, new focuses of these public corporations have been defined to cover quality education, vocational education, after-school programs and overseas businesses. However, the original curriculum-based training businesses were either acquired at a high price or are still profitable – thus the fairness of 1-yuan asset transfers has come into question.

Dongguan Kingsun received a notice from the Shenzhen Stock Exchange (SZSE) on March 15, being asked to explain the reasons and rationality for the large discounts on the transaction.

In addition to the 1-yuan transfer, some listed companies choose to shut down directly. On March 30, Dashan Education, a K12 off-campus training institution headquartered in Zhengzhou, Henan Province, released its 2021 annual results. According to the announcement, since August 2021, the off-campus training businesses for Chinese, mathematics, English and other compulsory subjects have been liquidated, and most self-run teaching centers have been closed.

At present, the transforming direction of these education stocks has been made clear, and can be summarized into K12 related education businesses, vocational education and overseas business. K12 related education businesses can be divided into quality education, after-school program, returning student tutoring, and more, aiming at the original K12 customers.

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51Talk will internationalize its existing businesses. In Q4 of 2021, the company’s net cash income from overseas business reached $2.9 million, and it is estimated to be between $4.4 million and $4.6 million in Q1 this year.