China will not allow private kindergartens to raise funds through share sales by themselves or as part of asset packages, the State Council, China’s Cabinet, announced on Nov 15 in a policy document.
Listed companies will not be allowed to invest in kindergartens and purchase kindergarten shares through stock issue or cash, according to the document.
Shares of several listed preschool stocks plunged in the wake of the announcement, and industry analysts say the policy may prove bearish for private kindergartens. They say the exact impact can be gauged after the actual implementation of the policies.
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A teacher feeds a boy at a kindergarten in Shishi, Fujian province. Xinhua |
Shares of NYSE-listed RYB Education Inc tumbled by 52.97 percent on Nov 15 and closed at $7.83 (6.87 euros; ￡6.10), down by $8.82. In November last year, the privately owned Beijing RYB kindergarten in Chaoyang district’s Xintiandi community was found to have allegedly abused young children.
Beijing RYB kindergarten responded on Nov 16 that the company’s management team has urgently discussed the issue, and the company’s shares may fluctuate in the short term. Whether to withdraw the listed kindergarten capital from the market depends on further policy arrangements, it said.
NYSE-listed Bright Scholar Education Group, the largest operator of international and bilingual schools in China, saw its shares decline by 16.71 percent on Nov 16 and closed at $10.57.
Meanwhile, some preschools listed on the A-share market and the Hong Kong bourse fell on Nov 16, with some even hitting daily lows.
Shares of Shenzhen-listed Vtron Group Co Ltd dropped by 10.05 percent that same day and closed at 5.28 yuan ($0.76; 0.66 euros; ￡0.59).
Southwest Securities said Vtron accounts for 2 percent of the kindergarten market share in China, and most of the kindergartens under the group are positioned as higher-end and located in major cities.
Li Yizheng, deputy general manager of Vtron, says the move will have a significant impact on the sector. The company is researching the solutions and says it is not convenient to issue opinions before it understands the issues more clearly.
Industry reports say the latest policy means that in the future, kindergarten assets can’t be capitalized at all. But for the moment, the policy only targets kindergartens and does not include other entities in the education sector.
The announcement also says social capital must not invest in kindergartens run by State-owned and collective assets, as well as nonprofit kindergartens, by mergers and acquisitions, trustee operation, franchise chains and protocol control.
Those who violate the regulations will face corrective measures from the education department, and no capital increase or share expansion will be permitted before completion of the rectification.
The announcement on preschool education reform points out that before June, local governments need to implement classified management rules for private kindergartens. They should also strictly audit the qualifications, kindergarten orientation, curriculum resources, scale and management abilities of profit-seeking kindergartens.
(China Daily European Weekly 11/23/2018 page26)