Zhangmen Education Inc. has set the terms for its initial public offering, scheduled for next Tuesday in New York.
The Shanghai-based e-learning company is offering 3.6 million American depositary shares in the price range of $11 to $13 apiece, according to the amended prospectus filed Thursday with the U.S. SEC. At the top of the expected range, Zhangmen would raise $46.8 million.
The underwriters may exercise the greenshoe option to acquire an additional 543,450 ADSs of Zhangmen upon the IPO. Securing the offering is Morgan Stanley & Co. LLC, Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc., CICC Hong Kong Securities Ltd., Macquarie Capital (USA) Inc., Futu Inc., Tiger Brokers (NZ) Ltd., and SNB Finance Holdings ltd.
Zhangmen is expected to lift off in public trading on the New York Stock Exchange under the symbol “ZME” on June 8. The company would trade alongside its peers in China’s online education market including Youdao Inc. (NYSE: DAO) and GSX Techedu Inc. (NYSE: GOTU). To take the market into perspective, both stock are trading lower year-to-date, with DAO down 10% despite reports of continuous growth and GSX down 69% on concerns over the short-seller allegations.
Traditional Chinese educators’ stocks have also shifted significantly lower recently on a shake-up in private tutoring. New laws are to be released this month that are expected to ban on-campus academic tutoring classes, any weekend tutoring, and some off-campus tutoring activities on weekdays. They would follow the new regulations imposed in March, which banned livestreaming classes after 9 p.m, academic tutoring for preschoolers, and put a cap on advertising expenditures.
After a boom in online learning during the Covid-19 outbreak, new regulations are screwing the caps on tight. Zhangmen operates in the sphere that would be affected by the new laws: The platform focuses on one-on-one and small-class after-school tutoring services covering core K-12 academic subjects.
The government crackdown could be to blame for Zhangmen’s downsized IPO target. In its preliminary prospectus filed in May, the company eyed a $100 million deal, while Bloomberg earlier reported that Zhangmen aims to raise $300 million in capital.
In 2020, Zhangmen counted 544,813 paid student enrollments in online one-on-one classes compared to 380,517 in 2019. In the first quarter of 2021, the number rose 52% year-over-year to 133,601, according to the prospectus. Small-class student enrollments were 294,397 in the first quarter of 2021.
Revenues in 2020 reached $613.3 million, up 51% year-over-year, while losses narrowed to $154.5 million. In the first quarter, Zhangmen booked $205.4 million in revenue in the three months through March, up 20%, on losses of $75.9 million, it said.