–
Larry Chen, until recently one of the richest people in the world, has lost most of his lavish wealth. Stricter regulations on educational companies are the latest worry for the former teacher.
–
While most people want to forget the corona year as soon as possible, Larry Chen had a wonderful 2020. Chen is the founder and CEO of Gaotu Techedu
an online provider of educational packages. The outbreak of corona forced students to stay at home en masse, causing the demand for Gaotu’s services to skyrocket. This led to a peak price for Gaotu in January 2021 and Chen’s personal wealth of more than 15 billion dollars. Chen still owns 44 percent of the shares. Gaotu moved to Wall Street in June 2019, then under the name GSX.
–
Reflection
2021 is the mirror image of 2020 for the share and for Chen’s fate. The fact that China has corona under control and all students can physically go back to class is the least of his worries. On Saturday, Beijing announced sweeping reforms for private education providers. Beijing says the education sector has been ‘hijacked by capital’. The bottom line is that education companies are no longer allowed to make a profit and that they are no longer allowed to raise capital. “The worst-case scenario has become a reality. Actually, these stocks have become uninvestable,” says JPMorgan.
–
“We are going to ask for more information from the government and act accordingly,” Gaotu Techedu said in a press release. On Wall Street, Gaotu is down about 17 percent on Monday an hour after opening, after falling 63 percent Friday as rumors of a reform surfaced. Other providers of education services also fell on the stock exchanges in China and Hong Kong.
–
The drop in the Chinese CSI300 index by more than 3 percent on Monday betrays an unrest that goes much wider than the education sector. “I can clearly see panic selling. Investors are pricing in the possibility of tighter regulation of all sectors that have grown significantly in recent years,” Castor Pang, chief research officer at Core Pacific Yamaichi told Bloomberg. Beijing previously focused on fintech companies, among other things. prosus
, the major shareholder of the e-commerce giant Tencent, is down by up to 10 percent in Amsterdam.
–
SEC
For Chen, the Chinese government intervention is just one of many issues in 2021. A major shareholder, Archegos Capital Management of Bill Hwang, imploded, causing Archegos to throw large packages of shares on the market. Several shorts, including the well-known Carson Block, are questioning Gaotu’s business model. Last but not least, the US Securities & Exchange Commission (SEC) has launched an investigation. The SEC’s attention was triggered by a dozen research reports that questioned its sales figures.
–
At the battered stock price, Chen is still worth $ 235 million, according to a calculation by Bloomberg. That is more than 98 percent or 15 billion dollars less than in January. Compared to its past, it remains an impressive course. Chen comes from a small, poor village in China. In 1999, he was still a regular high school teacher. He then made the switch to New Oriental Education, where he made a blitz career and made it to CEO. In 2014, he decided to create a new rival for New Oriental. New Oriental also tumbled on the Hong Kong stock exchange on Monday with 47 percent.
–
The essence
- Beijing is targeting private providers of educational services.
- Until recently, Larry Chen was one of the richest people in the world as an education guru.
- After the implosion of the Gaotu Techedu share, Chen is not even a billionaire anymore.
- Chen was born in a poor village and still taught high school in 1999.
–
–
–
/i/2002697216.png?f=fpa "Mortal Kombat series is the best-selling fighting game with 73 million copies – Gaming – News")