New Oriental Education & Technology group is reportedly eyeing a second listing in Hong Kong that would raise at least $1 billion as regulatory scrutiny in New York, where its shares are listed, intensifies.

According to Bloomberg, the China-based after-school tuition provider is working with Bank of America, Credit Suisse and UBS on a share sale that could occur by the end of this year, and additional banks could be drafted in at a later stage.

News of the $22 billion-operator’s plan comes amid a crackdown by the Trump administration on China-based, US-listed companies, which have come under increasing pressure over shadowy auditing and accounting practices. In June, President Donald Trump – whose relations with China have soured considerably this year – imposed a 60-day deadline for US financial regulators to recommend ways to tighten their grip on Chinese companies accessing global capital through US exchanges.

GSX Techedu, a China-headquartered New York-listed online tuition provider that has this year been accused of fraud on at least three separate occasions by short-sellers, is understood to be under investigation by the Securities and Exchange Commission (SEC), Wall Street’s watchdog. When contacted by this publication to verify this information, a spokesperson for the SEC declined to comment.

Just days after the US announced that regulatory oversight would be ratcheted up, the managers of New York-listed China Distance Education filed an offer to take the company private.

Outside the education sector, other US-listed Chinese organisations including 21Vianet Group, GDS Holdings and Yum China are reportedly weighing listings in Hong Kong amid rising tensions between Washington and Beijing.

Commenting on the news that New Oriental is seeking a dual listing, a Hong Kong-based analyst told this publication that there are “probably more to come”.

Competitors to New Oriental that are based in China but listed in New York include TAL Education Group, the world’s largest public education provider, Bright Scholar, Koolearn (which was spun out of New Oriental), Ambow Education and Sunlands Technology Group.

One source speculated that TAL, a direct competitor to New Oriental, could follow suit.

Last month, New Oriental announced it was to raise $300 million of debt via Hong Kong’s stock exchange.

Founded in 1993, the firm’s full-year 2020 results illustrated robust growth, despite significant headwinds during the fourth quarter from the Covid-19 pandemic, which saw net income slip to $13.2 million from $43.2 million in the year-ago period.

Date published: 12 August 2020

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