New Oriental Gets Accounting Lesson 新东方受到会计调查
Tuesday was not a kind day to US-listed Chinese companies, as education specialist New Oriental (NYSE: EDU) led a downward charge that saw its shares go into free-fall, losing a third of their value, after it released its latest quarterly results. But investors weren’t focused on the results themselves, which were actually quite respectable, but rather got spooked by a note near the bottom of the announcement saying the company was being investigated by the US securities regulator for its accounting practices. (results announcement)
Oops. New Oriental and its peers, including TAL Education (NYSE: TAL) and Xueda (Nasdaq: XUE) were once investor darlings, enjoying strong growth on the insatiable demand from Chinese for extra education both for themselves and their children. But that growth has slowed considerably over the last year, sending New Oriental’s shares down by about a third over the last 12 months even before the Tuesday sell-off.
This new investigation certainly won’t help to win investors back to the company. TAL also skidded 9 percent on the report, with Xueda down a more modest 1.5 percent. Adding to New Oriental’s woes, a law firm has already come out to announce its own investigation into the matter, in what is almost certain to result in a class action lawsuit. (law firm announcement).
This latest investigation won’t do much to alleviate the ongoing confidence crisis surrounding overseas-listed Chinese stocks, which have taken a beating for more than a year now following a series of accounting scandals uncovered by short-sellers starting last spring. With Chinese companies getting set to release their second-quarter results in the next few weeks, I wouldn’t be surprised to see 1 or 2 more similar disclosures of investigations by the US securities regulator, which could further prolong the confidence crisis.
Meantime, leading online travel site Ctrip (Nasdaq: CTRP), whose shares have already taken a beating due to a recent round of price wars with its rivals, saw its shares drop an additional 7.4 percent on Tuesday after the company was removed from the Nasdaq 100 index. (English article; Chinese article) Ctrip’s removal from the index is due to technical factors, and probably reflects the fact that the company’s shares have lost two-thirds of their value over the last year, hit by both the price wars and the confidence crisis.
With stock prices and valuations getting so low, I previously predicted we could see a round of M&A or potential privatizations coming soon as investors look to take advantage of bargains. We’ve seen one such buy-out attempt so far involving telecoms software specialist AsiaInfo Linkage (Nasdaq: ASIA), while e-commerce leader Alibaba.com and online entertainment firm Shanda Interactive have both recently privatized. With no signs that the confidence crisis is set to ease anytime soon, look for these buyouts and privatization bids to pick up in the months ahead, with at least 2 or 3 big names likely to become targets of such efforts by the end of the year.
Bottom line: An accounting probe into New Oriental Education marks the latest turn in a confidence crisis toward overseas-listed Chinese stocks, which looks set to run through the end of the year.
Related postings 相关文章:
