When the stock price of red yellow blue education group listed in the United States directly cut 50% after the opening of the U.S. stock market on the 15th, many ordinary investors in the United States were confused, so what's the matter with the collapse of red yellow blue? Preschool education industry will panic!
On the 14th, the new deal "several opinions on deepening the reform and standardizing the development of preschool education" came out, proposing to curb excessive profit seeking behavior. Private parks are not allowed to be listed separately or as a part of assets. Listed companies shall not invest in profit-making kindergartens through stock market financing, or purchase the assets of profit-making kindergartens by issuing shares or paying cash.
An American investor asked at a stock investment forum: 'who knows what happened? '
The end of rapid growth
For many small and medium-sized investors in the United States, their understanding of red, yellow and blue is limited to this institution which is engaged in early childhood education in China. In 2017, the institution successfully listed on the New York Stock Exchange, raising $100 million, becoming the first Chinese company engaged in early childhood education listed in the United States.
In the prospectus at that time, red, yellow and blue said that the company was founded in 1998 and is the largest early childhood education service institution in China based on the annual income in 2016. As of June 30, 2017, it has covered 307 cities in 30 provinces of China, and its business model is the combination of self operation and franchise authorization. Red, yellow and blue said that their core values are "care" and "responsibility", and will provide personalized and age-appropriate education to cultivate and motivate each child to become a better self. The company is committed to building a long-term education brand that can closely link the classroom, family and society, and provide the best service for children's value, personality building and long-term development.
According to the financial data in the prospectus, red yellow blue's annual revenue increased by nearly 30% from 2014 to 2016. After losses occurred in 2014 and 2015, it made a profit of US $6.5 million in 2016.
Red, yellow and blue quoted frost Sullivan's report in the prospectus, saying that China's early education market increased from 179.3 billion yuan to 471.6 billion yuan from 2011 to 2016, and it is expected that the market will further increase to 920 billion yuan by 2021. Based on this calculation, from 2016 to 2021, the compound annual growth rate is as high as 14.3%.
For many ordinary small and medium-sized investors in the United States, red, yellow and blue is a Chinese company in a fast-growing industry, in a leading position in the industry, with many years of operation and management experience, which has successfully built an excellent brand and good financial condition.
Short supply and perfect balance sheet
An investor who has long paid attention to the education market told Tencent News "Horizon" that for overseas investors who have learned that China has gradually liberalized its family planning policy in recent years, the early education industry has given them full confidence in the relevant investment targets.
An American individual investor said in an investment forum, "I chat with a colleague stationed in China. He said that China's education industry is developing rapidly, and the high-end preschool education and kindergarten are in short supply in big cities. In Beijing and Shanghai, the tuition fees are about 1000 to 1600 dollars a month, even if the children still need to wait in line for more than a year to enter the school. '
An equity research firm rated red, yellow and blue as' impeccable balance sheet with high growth potential. '. '
After listing at $18.50 per share, the stock price of red, yellow and blue rose to more than $30 at one time, with a market value of nearly $1 billion, which confirmed investors' confidence in the company.
However, less than two months after the listing, the abuse of red, yellow and blue children broke out, which led to the stock price plummeting by 40% at one time. There was also a lot of discussion among overseas investors. Some investors believe that because red, yellow and blue are aimed at high-end customer groups, the charges are expensive, and the event will cause damage to the brand of red, yellow and blue, so in the long run, it will affect its performance.
Some investors also believe that the events in some parks do not mean that the company itself has problems, and that all the legal proceedings will happen one after another when the stock price of listed companies drops sharply.
'in the context of New Fertility Policies and economic growth, red, yellow and blue will only get better in the future. "Said the investor.
Jeffries, an investment bank, gave a red yellow blue buy rating in July, while Morgan Stanley upgraded its red yellow blue rating from hold to buy in October.
The new deal on the 14th was another near catastrophic blow to honghuanglan's stock price. Wei Ping, chief financial officer of honghuanglan, said in an exclusive response to Tencent News "periscope" that night that he could not give a comment at present and was still in an emergency meeting to study. But she also said there was no doubt that she supported the new deal.
After finally learning the main reason for the sharp decline of the stock price, an individual investor asked in the Forum: 'does the new deal mean that red, yellow and blue will start the privatization process? If so, what would be the price of privatization? '