On July 28, Chinese education stocks began to rebound in the US market on Tuesday after several days of decline. $TAL rose more than 25% and its total market value is now about $3.553 billion. $YQ rose nearly 12% and now has a total market capitalization of about $224 million. $GOTU rose 15% with a total market capitalization of about $739 million currently. $EDU rose 12.89% and has a total market capitalization of about $3.754 billion.
Recently, China has issued new regulations that prohibit subject-related tutoring companies from making a profit, raising capital, or listing.
Larry Chen, a former school teacher, has lost his billionaire status as one of the world's richest people.
Chen, the founder, chairman, and chief executive officer of $GOTU, is now worth $235 million, according to the Bloomberg Billionaires Index.
It was reported that his online-tutoring firm has plunged about 70% in New York trading since Friday.
Chen's wealth has evaporated by more than $15 billion since late January as GOTU 's stock tumbled.
The wealth of TAL Education Group's CEO, Zhang Bangxin fell by $2.8 billion to $1.1 billion after the company's shares plunged 80% in New York since Friday. The Chairman of New Oriental Education & Technology Group Inc. Yu Minhong also lost his billionaire status, blowing away $868 million as $EDU has fallen 69%, and leaving him with a stake value of $396 million.
No one has ever predicted the "storm" will have such damage before.
Previously, $GOTU and $TAL, the top stocks among education stocks, rose collectively by a good amount.
$GOTU was founded in 2014. From its debut in the stock market in 2019 to reach its highest point on January 27th this year, $GOTU rose more than 13 times.
Founded in 2003, $TAL was in its highlighting moments as its revenue growth exceeded expectations in 2019.
On February 16, $TAL's share price reached an all-time high of $90.96 per share.
But as China imposed the toughest restrictions ever on its $100 billion private tutoring and online education industry, the series of events persuaded investors from Tiger Global Management to Temasek Holdings Private Limited to selloff. Those education institutions were prohibited to list; supporters were forced out, and foreign capitals were banned to enter the sector.
$GOTU's share price has lost 98 percent of its value. The collapse of Bill Hwang's Archegos Capital Management was also a factor for GOTU's plunge.
Subsequently, giants reacted after the policy was implemented.
$GOTU will comply with the regulations and fulfill social responsibilities,” Chen Xiangdong said on Weibo, on Saturday night.
$TAL,$EDU released similar statements vowing to comply with the new rules.
The reform will also put pressure on leading industry players for years, Catherine Lim, a senior analyst at Bloomberg, wrote in the report.
According to China's new policy, which aims to reduce the dual burden Chinese students faced from both schools and after-school tutoring institutions, K12 private off-campus training institutions will be almost driven out.
But the once-popular quality-oriented education seems not to be cracked down.
Perhaps quality-oriented education, which focuses on programming, art, etc., is also a choice for the transformation of online education.
Recently, Kaikeba.com, which focuses on online education for adults, raised a new round of funding of RMB600 million.
Compared to K12, adult education has become a new target for online education companies in desperate need of business transformation.
No matter to a change or not, the education industry will not be invested in capital like before anymore.
Companies in the education industry may achieve transformation if their cash flow is still sufficient
However, those that have difficulties in cash flow may be difficult to survive this crisis given the reducing businesses.