OneSmart Shares Slide Further on $25 Million Private Placement

China's e-learning provider is set to close a private placement of five-year bonds on Friday.
Belinda ZhouFeb 29,2020,07:55

The stock in OneSmart International Education Group Ltd. (NYSE: ONE) tumbled 5% Friday morning after the company announced that it has entered into a $25 million private placement agreement with its minority shareholder.

Under the agreement, the Shanghai-based education provider will sell the $25 million convertible notes with an interest rate of 4.75% per year to Yiheng Capital Partners, L.P., the company said.

The private placement is expected to close on or around Friday, OneSmart said. 

The convertible notes will mature on February 28 in 2025 and Yiheng has the right to ask OneSmart buyback all or part of its convertible notes in cash on the same date in 2023.

Earlier on February 19, the company said in a statement that in the three months through November that its net loss widened to $15.6 million compared with $5.6 million from the same period in 2018. However, OneSmart's revenue reached $113.4 million, up 23% year-over-year.

OneSmart offers online education courses through its OneSmart online brand. Through the full year 2019, the company operated a network of 432 study centers across 35 cities in China. 

Due to tightened regulations implemented by Beijing, many companies operating in the education sector in 2019 struggled. To navigate around the regulatory changes to school admission practices mainly affected in Shanghai, OneSmart said on its earnings report that it launched an artificial intelligence Math program, which addressed broader market demand. 

The coronavirus in China kept students home, which fueled many Chinese education stocks in the short run. Stocks in China Online Education Group (NYSE: COE) jumped up 127%; GSX Techedu Inc. (NYSE: GSX) soared 87%; Ambow Education Holding Ltd. (NYSE: AMBO) gained 44% since 2020 by Friday morning.

Shares in OneSmart have lost 23% since 2020, trading at $5.16 per American depositary share Friday morning.