Newly listed Chinese education business hit by abuse claims
RYB Education, a private equity-backed Chinese kindergarten operator that listed in New York two months ago, has seen its stock price collapse in response to child abuse claims.
RYB closed at $16.45 on November 24, down 38.5%, despite the board approving a $50 million share repurchase program. The company’s IPO, which generated proceeds of $144.3 million and facilitated a partial exit for Ascendent Capital Partners, was priced at $18.50 per share. The stock gained 40% on its first day of trading.
Police launched an investigation after reports from some parents of children enrolled in a class at an RYB-branded kindergarten in Beijing, claiming their children had experienced seriously improper conduct. RYB said in a statement that it handed over security monitoring content and surveillance devices, while the staff allegedly involved have been suspended. It will continue to cooperate with police and other authorities.
Founded in 1998, RYB claims to be the largest early childhood education provider in China by revenue. As of June, its network comprised 80 directly-owned and 175 franchised kindergartens across 130 cities and towns. The directly-owned facilities alone had more than 20,000 enrolled students. RYB also had 853 play-and-learn centers aimed at pre-kindergarten age children – most of which are franchised out – and it sells a variety of teaching aids and educational toys.
Ascendent subscribed to secured redeemable notes with a principal value of $51.7 million in in the company in November 2015, taking out several early-stage investors. The GP sold $42.6 million worth of shares in the IPO, reducing its stake from 46.9% to 29.9%.
China’s private education industry is a popular target for PE investors, with numerous investments at high valuations in recent months as well as several US listings. On a day when the Dow Jones Industrial Average posted a modest gain, Bain Capital Private Equity-backed Rise Education dropped 4.27% while Chengwei Ventures and Crimson Capital-backed Four Seasons Education fell 1.75%.
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