China-based education stocks rocked on worries over new PRC regulations

Shares of China-based education companies took a beating in Friday, amid media reports that the Chinese government is mulling new regulations concerning after-school tutoring services.

Citing anonymous people familiar with the matter, Bloomberg reported that the People’s Republic of China is considering asking tutoring companies to turn nonprofit.

Following those and other reports, the lists of the biggest decliners and most active stocks on major U.S. exchanges were littered with the U.S.-listed shares of China-based education companies.

Tal Education Group’s stock
TAL,
-70.76%

led the pack, plunging 70.8% to $6.00, the lowest closing price since October 2015. The percentage decline was the biggest since the company went public in October 2010.

Trading volume was a record of more than 259.5 million shares, or about 13 times the full-day average and enough to make the stock the third-mostly actively traded on U.S. exchanges.

The most actively traded stock was New Oriental Education & Technology Group Inc.’s
EDU,
-54.22%
,
which plummeted 54.2% to $2.93, the lowest close since February 2016, and enough to make the stock the third-worst performer on U.S. exchanges.

Volume spiked to a record of more than 801.6 million shares, compared with the full-day average of about 35.6 million shares.

The second biggest loser was Gaotu Techedu Inc.’s stock
GOTU,
-63.26%
,
which tumbled a record 63.3% to a record low close of $3.52.

All three company’s issued identical statements. Although all three companies said it was not their policy to comment on market speculation, they issued identical statement regarding reports from both English and Chinese language media outlets that PRC regulators were considering new regulations:

“The regulations have not been published, and the company has not received official notification of the regulations.”

Elsewhere, shares of China Online Education Group
COE,
-43.11%

sank 43.1%, Youdao Inc.
DAO,
-42.81%

dove 42.8%, RISE Education Cayman Ltd.
REDU,
-40.53%

slid 40.5% and 17 Education & Technology Group Inc.
YQ,
-38.70%

dropped 38.7%. Zhangmen Education Inc’s stock
ZME,
-35.22%

fell 35.2% and Bright Scholar Education Holdings Ltd.’s stock
BEDU,
-10.76%

shed 10.8%.

China Online Education, RISE Education and 17 Education issued the same statements as Tal Education, New Oriental and Gaotu.

Youdao and Zhangmen gave the same statements, but they were a little different than those of the others:

“As of the date of this press release, the company has not received any official notification of the new rules and regulations reported in the press. The Company will closely monitor regulatory developments in the PRC education industry.”

Bright Scholar did not issue a statement.

The stocks’ selloff comes as the iShares MSCI China exchange-traded fund
MCHI,
-3.47%

slumped 3.5% to the lowest close since October 2020, while the S&P 500 index
SPX,
+1.01%

rallied 1.0% to the first-ever close above 4,400.

Roy Walsh

Roy Walsh

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