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      Gaotu Techedu Inc. (GOTU) Stock Plummets Following Rising Oversight and Involvement by Chinese Government in Private Education Sector - Stocks Telegraph

      By Shimrez Hyder

      Published on

      July 26, 2021

      4:34 PM UTC

      Gaotu Techedu Inc. (GOTU) Stock Plummets Following Rising Oversight and Involvement by Chinese Government in Private Education Sector - Stocks Telegraph

      Gaotu Techedu Inc. (GOTU) stock prices plummeted by 24.72% some time after market trading commenced on July 26th, 2021, bringing the price per share down to USD$2.65 early on in the trading day.

      New Regulations

      China recently announced a massive set of new regulations for private education companies, primarily aimed at decreasing workloads for students. The government mandates were also designed to overhaul a marketspace that it claims has been “hijacked by capital”. The regulations ban companies such as GOTU stock that adhere to school curriculums from generating profits, raising capital, or going public. School-related tutoring can no longer be offered on weekends or during vacations. They also cannot give classes to children under the age of six, a demographic that has been increasingly pushed to start studying from an earlier age.

      GOTU Stock in Changed Landscape

      The Chinese education technology sector reached a value of USD$100 billion as companies like GOTU stock catered to the increasing number of parents wanting to give their children an early academic advantage. The regulation changes will see business models being drastically altered as companies are forced into making extensive changes in order to maintain compliance. The drastic change will see the prohibition of the overseas investments that have been the lifeblood of the sector. Companies that find themselves in violation of the new regulations are required to rectify the situation, as appropriate.

      Details of Regulations

      The private education sector attracted billions of dollars and was expected to generate USD$76 billion in revenue by 2024, of which GOTU stock hoped to be a part. The regulatory branch that aims to regulate the industry was formed in June 2021 and aims to devise and oversee the changes. The regulations were expressed in general terms, with broad applicability to common practices throughout the industry. The regulations are directed at compulsory subjects, with supplementary subjects such as art and music avoiding falling under the umbrella of the new regulations.

      Government Involvement

      The regulations were jointly announced on July 24th, 2021 by the General Office of the Communist Party of China Central Committee and the General Office of the State Council. The set of rulings aims to mitigate the excess associated with homework and after-school tutoring for students as young as six who are receiving mandatory education.

      Future Outlook for GOTU Stock

      As one of the many up and coming companies that is forced to make adjustments to adhere to the new regulations, GOTU stock is keen to capitalize on the education sector being disrupted. Current and potential investors are hopeful that management will leverage the resources at their disposal to facilitate significant and sustained increases in shareholder value.

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