GOTU - FEDU Stock Rockets 35% as Chinese Education Companies Navigate Regulatory Threats
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Chinese education stocks have taken a hard beating this summer. The Chinese government is making an effort to spur long-term economic growth. In doing this, it is potentially looking to force for-profit education companies to become non-profits. This, of course, kills the industry for investors, and thus, the stocks have been tumbling ever since. Some companies are now trying to claw their way out of the clutches of regulation. Others, like Four Seasons Education (NYSE:FEDU), are gaining big with savvy trading tactics, like FEDU stock’s newly announced buyback.
In late July, the Chinese Communist Party (CCP) made known its intent to tighten regulations on the education industry. The government wants to give its citizens easier access to educational tools as it looks to create a long-term plan for upping economic growth. This type of regulation falls in line with other regulations meant to benefit in the long term, like loosening restrictions on its child policy.
As the government toys with the idea of axing for-profit tutoring companies, these companies are making quick pivots toward new ventures. Meten Holding Group (NASDAQ:METX) is turning toward blockchain. This month, the company announced its intent to break into crypto mining — an equally tumultuous industry in China — as well as non-fungible token (NFT) assets. Meanwhile, industry peer Gaotu Techedu (NYSE:GOTU) is pivoting to teaching adults English in order to skirt potential regulations.
FEDU Stock Booms, Peers Dive as Four Seasons Prepares Stock Buyback
Four Seasons is holding up to regulations in the sector; it provides regular updates on the company’s compliance with the Chinese government. Today, the stock is also on a huge upward tear. That’s because it’s announcing its plan to buy back $15 million worth of American Depositary Shares. The buyback will be happening over the course of the next year.
Investors are always keen on a buyback; reducing the amount of shares floating around is a good sign for the value of one’s holdings. So naturally, the stock is soaring on the news. FEDU stock is up 35% going into the afternoon, with 16 million shares trading hands against a daily average of 233,000. Meanwhile, its peers continue to stumble; GOTU is losing over 6%, even after a positive earnings report yesterday. METX is down 0.5% as it announces a new public offering.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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