Shares of Chinese Edtech Firms Gain After News of New Licenses

By Dhirendra Tripathi

Investing.com – Stocks of U.S.-listed Chinese education companies rose Monday after The Wall Street Journal reported that China planned to issue more than a dozen licenses that would allow them to resume after-school tutoring.

Gaotu Techedu stock (NYSE:GOTU) rallied 12%, New Oriental Education (NYSE:EDU) surged 6.6% and TAL Education (NYSE:TAL) rose 6%.

The policy will bring to an end the uncertainty that has engulfed China’s edtech sector and erased billions of dollars in their stock values since the news broke more than four months back that the companies will be asked to go non-profit.

According to the WSJ report, tutoring companies including Tencent Holdings (OTC:TCEHY)-backed Yuanfudao have discussed with regulators their request to be permitted to resume tutoring to students of ninth grade and below.

Under the proposed licensing regime, companies will be required to operate after-school tutoring on a non-profit basis while being allowed to make a profit elsewhere, such as by tutoring adults for professional exams. As per the report, the government will also place a cap on the price companies can charge for each after-school class.

Since June when there was no news of tightening of rules, Gaotu has lost over 80% of its value. Similarly, Tal Education trades around one-tenth of its value in June and New Oriental trades at about one-fifth.

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