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Government Bans Kindergarten Companies from Selling Shares; RYB Education Tanks 50%

The officials stressed that preschool education was a social public welfare, which is an important and inseparable part of the national education system.

Selina Cheng
    Nov 15, 2018 1:32 PM  PT
Government Bans Kindergarten Companies from Selling Shares; RYB Education Tanks 50%

Shares of RYB Education Inc. (NYSE: RYB) dropped more than 50 percent in less than three minutes this morning in New York after a detailed policy document regarding Chinese education reform was released by the State Council.

The initiatives aim to "prioritize affordable schooling" and "banned all private kindergardens from selling shares to the public either by themselves or as part of asset packages," a statement said. Also, publicly listed companies are not allowed to invest in private kindergartens through share sales or cash injections under the new policy, according to the report.

In the announcement, the officials stressed that preschool education was a social public welfare, which is an important and inseparable part of the national education system. Thus, it should be available and affordable to every student, they said. In turn, local authorities were told to limit the numbers of high-cost, private kindergardens and to strengthen the supervision of these private schools to ensure that no students were charged excessive fees.

The restrictions were part of broader preschool education reform initiatives issued by the officials. Overall, the government is seeking to inject more financial subsidies into preschool education, particularly in poverty-stricken rural areas in the country's central and western regions. 

As part of the move, the State Council set a target that more than 85 percent of children between the ages of 3 to 6 should be enrolled in certified kindergartens by 2020. By then, the council said, 80 percent of these kindergartens must be either public schools or socially responsible private schools that are not backed by publicly listed companies. 

By 2020, the country also aims to enroll more than 200,000 university students into preschool education programs annually and to train 1.5 million preschool principals and teachers. By 2035, preschool education, which lasts for three years, would be available for all children of the appropriate age, with a national preschool network set to be established, according to Xinhua News.

Following the news, several education-related stocks fell substantially, with RYB Education, a private kindergarten operator, tanking 53 percent to $7.83 per share, wiping out more than $240 million of its value. Bright Scholar Education Holdngs Ltd. (NYSE: BEDU), which also provides schooling for kindergarten students, fell more than 16 percent in trading today, closing at $10.57 per share, down $2.12. 

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