New Oriental Education & Technology Group Inc. (EDU) stock was falling today in pre-market after providing an update on regulatory development. EDU stock price saw a downtrend of 4.61% to drop at $1.86 a share at the time of this writing. The stock was green in the previous trade and went up by 5.41% at closing. Let’s take a closer look at this stock.
What’s happening?
New Oriental Education & Technology Group Inc is the private education service provider in the People’s the s Republic of China. EDU stock became red after the issuance of Beijing Municipality’s Measures by the Chinese government. Beijing Measure issued in order to lessen the workload of Homework and after-school tutoring on students in Compulsory Education in Beijing.
Beijing Measures:
- China’s compulsory education system(“Academic AST”) will approve no more after-school tutoring services providers on academic subjects. The remaining institutions will be re-registered as a nonprofit. Previously registered Academic AST providers will again go through the reviews and re-registration process The registration as well as ICP license of disqualifying institute would be canceled.
- The institutions will be unable to provide after-school tutoring services during the national holiday, weekend, summer, and winter break.
- Academic AST providers will be unable to offer advance or outside content from the school curriculum. Moreover, institutions will not offer a foreign curriculum. Academic AST providers will not solicit or recruit school teachers by offering extravagant compensation. Moreover, Academic AST providers will not recruit any foreign personnel for training activities.
- The educational organizations will follow the government guidelines for pricing. This will prevent excessive profit-seeking activity.
- Academic AST providers will be unable to list their securities or conducting any capital market activities. Listed companies will be unable to invest in Academic AST providers by any means.
Impact ON EDU stock:
These measures are not limited to just Beijing as many other provinces have adopted the same measures. EDU stock expects that more provinces and municipalities will follow the same measures. This EDU stock as a result of this measure will feel the material adverse impact on its existing Academic AST business. The stock has ceased its Academic AST classes national holidays, weekends, and current school break period in Beijing.
Conclusion:
Many after-school tutoring services provider stocks are suffering due to Chinese new laws and regulations on the education sector. EDU stock’s Academic AST classes had generated had contributed a lot in high revenue in the past. It would be interesting to see how EDU’s management will handle this situation. For now, the EDU stock will cooperate with the government by following the rules and regulations.
