Tetragon Financial Group Limited Monthly Fact Sheet April 2021


China destroys top-flight educational startups’ IPO plans

(Bloomberg) – China is stepping up its crackdown on its online education sector, forcing once high-profile startups to shelve plans for initial multibillion-dollar public offerings this year. China’s post-Covid internet industry, which attracted more than $ 10 billion in venture capital funds last year from powers like Alibaba Group Holding Ltd., Tencent Holdings Ltd. and SoftBank Group Corp. then Beijing intervened. after-school tutoring was putting enormous pressure on Chinese children, signaling a personal interest in curbing excess. This has led to warnings in state-owned media and sanctions aimed at predatory practices that play on a nation’s obsession with academic achievement. According to sources familiar with the matter, the country’s education ministry plans to create for the first time a dedicated division to oversee all private education platforms. The government campaign has brought several mega-introductions to a screeching halt. potential stock market. Tencent-backed VIPKid and Huohua Siwei postponed registrations in the United States as they worked with banks for months, people said. Zuoyebang, invested by Alibaba, will likely miss its goal of debuting as early as this year, one said. And Tencent-backed rival Yuanfudao – at $ 15.5 billion the most valuable of the lot – is not going to launch IPO preparations anytime soon, they said, asking to be identified to talk about issues. internal. which flourished when schools sent students home and then launched free-to-all marketing, according to regulators, it directs millions of children to staggering virtual classrooms with uncertain benefits. Their concern centers not only on pricing or reckless advertising, but also the growing divide between the haves and have-nots – those who can afford to take extra lessons. To that end, authorities have imposed a plethora of restrictions this month, including limiting the after-school tuition fees that companies can charge, and fined Yuanfudao and Zuoyebang for false advertising claims. children six years of age or younger to homework restrictions and compulsory licenses for all teachers. Reuters reported that new policies could include a moratorium on weekend lessons, which account for more than a third of private lessons in the country according to Bloomberg Intelligence. Yuanfudao declined to comment, while Zuoyebang and Huohua Siwei did not respond to requests for comment. A spokesperson for VIPKid declined to comment on the IPO plans, but said the company was closely following the plans. updates in the education sector. Read more: Start-up Edtech Zuoyebang says weighing US $ 500 million IPOStay-at-home tutoring was increasingly popular around the world – especially in Asia – even before Covid 19 dropped in-person classes . But it was in China that the industry took its own life. Every day, at least 50 million students – the equivalent of the entire Spanish population – could use Zuoyebang’s platform, the company said, and this scale is why the country’s online education startups have become among the most valuable in the world. after attracting $ 10.5 billion in funding last year, more than what was collected in total over the previous three years, according to research firm Preqin. China’s e-learning market is expected to reach 315 billion yuan ($ 49.5 billion) in 2020, almost tripling from five years ago, according to Statista, a global market data tracker. It also helps explain why the Xi administration is taking exceptionally direct measures to influence the development of the industry in China. His government in general is keen to curb the growing influence of internet giants like Tencent and Alibaba, among the industry’s biggest backers, through a series of regulatory polls and record-breaking fines. Officials are also concerned by hundreds of millions of parents investing their savings online. classes, while subjecting children to increasingly heavy workloads. As with past booms built on shaky ground – for example, in peer-to-peer lending or inappropriately licensed wealth management products – Beijing moved quickly to defuse what it saw as a potential time bomb. GSX Techedu Inc., New Oriental Education & Technology Group Inc., and TAL Education Group – which primarily operate physical schools but serve as industry sentiment barometers – have lost $ 55 billion in value since the start of March. . Investors from SoftBank and Sequoia to Hillhouse Capital and Tiger Global, among the biggest proselytizers of recent years, have been swept away by the ferocity of regulatory crackdown and in many cases have been forced to withdraw from lucrative exits. . Zhangmen Education Inc., which filed for an IPO in the United States on May 19, plans to test investor confidence amid regulatory uncertainties. The Warburg Pincus and SoftBank-backed e-learning upstart has yet to give up an enrollment plan, according to a person with knowledge of the matter. And on May 25, Jiayi, a Beijing-based company operating both online and offline tutoring centers, also filed for an IPO in Hong Kong. Both, however, cite increased competition and new regulatory requirements as their risk factors. Zhangmen did not immediately comment. This fierce rivalry manifested itself unexpectedly – sometimes worryingly – in January, with a fury over social media erupted after companies like Yuanfudao, Zuoyebang Educational Unit and ByteDance Ltd. hired the same actress to pose as a teacher on their platforms, local media reported. The same bespectacled woman introduced herself as English and math teachers in various promotional materials, and in one of the promotional videos uploaded, she directly targeted parental paranoia – precisely what regulators have criticized against. The actress, whipping up a 33-hour live streaming lesson program that costs just $ 8, warned that missing something has consequences. “It could be the parents themselves who are ruining their children,” she said. Ahead of the likely US IPO (updates with ninth paragraph comments) More stories like this are available at bloomberg.com Subscribe now to stay ahead with news source most reliable commercial. © 2021 Bloomberg LP

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