Shares of New Oriental Education (NYSE: EDU) have tanked this week as investors brace for the Chinese government's anticipated crackdown on the private tutoring industry. The government is expected to unveil a set of strict regulations designed to tighten controls on the sector. As of 1:40 p.m. EDT on Thursday, New Oriental Education shares had shed 21% of their value week-to-date.
While reports around the government's plans had been circulating for months, Reuters said on Wednesday that the new rules will be much worse than expected. An anonymous source told Reuters that private tutoring companies "should be preparing for the worst." The government is reportedly looking to implement a ban on online and offline tutoring services during weekends and certain holidays that could result in the consumer discretionary companies losing 70% to 80% of their revenue.
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Why New Oriental Education Stock Was Tanking This Week