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China’s New Oriental Education Group on Comeback Trail

The New Oriental edu-tech group has staged a shock turnaround with a dramatic share surge in recent days, amid hope that a new live-streaming strategy might salvage some of its business


The rise in New Oriental Education's stock was prompted by the company's proposed buyback of $400 million worth of shares.
The headquarters of New Oriental Education and Technology is seen in Beijing. File photo: Reuters.

 

One of the biggest victims of China’s regulatory crackdown – the New Oriental education conglomerate – has staged a shock turnaround in recent days amid hope that a new live-streaming strategy might salvage some of its business.

Shares in New Oriental, which was previously one of the largest private tutoring companies in the country, climbed for a fourth straight day on Wednesday.

The company’s fortunes changed overnight in July last year when Beijing enforced sweeping new rules on private education that barred tutoring for profit. New Oriental’s shares plunged and it was forced to dismiss tens of thousands of staff.

The group tried to pivot to sectors unaffected by the regulations, including dancing and drawing classes, and in December ventured into selling agricultural products online via live streaming, with its founder Yu Minhong, well-known in China for his entrepreneurial undertakings, occasionally hosting the sessions.

The company’s sales were lacklustre, however, until late last week when its hosts, former New Oriental teachers, started using the sessions to teach English to viewers as well.

In one video that went viral on Chinese social media, the New Oriental host, after promoting a set deal for steaks, pulls out a small whiteboard where he wrote words including “steak” and “seasoning” in English, explaining how to use them in sentences before encouraging viewers to buy.

Sales from New Oriental’s live-streaming platform, which had been stuck at less than 1 million yuan ($148,858) a day, leapt past the 15 million yuan mark on Friday, according to data from live-streaming tracking platform Huitun.

 

ALSO SEE: New Oriental Laid Off 60,000 After China’s Education Crackdown

 

Koolearn Technology Shares Soar

Shares in Koolearn Technology, which operates New Oriental’s live-stream e-commerce business through a studio called Dongfang Zhenxuan on Douyin, surged 54.2% on Wednesday.

Shares listed in Hong Kong in New Oriental, which holds 55.7% of Koolearn, jumped 22.5% on Wednesday and are up 54% since the open on Friday.

However, they are still only worth about a third of their value before the new rules came in last year. New Oriental is also listed in the United States.

Citi analysts, who have a “buy” rating on New Oriental, called Koolearn’s online live broadcasting a bright spot and estimated it could achieve more than 7 billion yuan in annual gross merchandise value if it maintained the current run rate.

China banned tutoring for profit in an attempt to ease pressure on children and parents, but it also led to a wave of school closures and layoffs across the private education sector.

Some customers who purchased products from New Oriental after watching the live streams on Friday said they were impressed by the company’s never-say-die attitude.

“I burst into tears when I watched it,” said Kong Ling, a tech worker in Hangzhou. “I’m watching a warrior who stands up firmly despite being beaten by the iron fist of life and I wanted to buy to show my support.”

 

• Reuters with additional editing by Jim Pollard

 

ALSO on AF:

China Education Fund Bottom of the Class after Tutoring Crackdown

China Private Equity Firms ‘Waiting for Death’ After Tutoring Crackdown

China’s Private Tutoring Overhaul Stuns Online Education Industry

 

 

Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.

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