New Oriental Education & Technology Group Inc. Provides Update on New Regulations

Rhea-AI Summary

New Oriental Education & Technology Group (NYSE: EDU) announced on July 24, 2021, that China's state media disclosed a new regulation impacting after-school tutoring services. The regulation mandates that institutions must register as non-profit, prohibits foreign ownership, and disallows new academic tutoring institutions. Additionally, companies like New Oriental cannot raise capital for academic tutoring in compulsory education. The company anticipates significant adverse effects on its academic after-school programs and will comply with the new rules.

Positive

• None

Negative

• Anticipates significant adverse impact on academic after-school tutoring services due to new regulations.
• Prohibition on foreign ownership and new institution approvals could limit growth opportunities.
• Restrictions on capital raising for educational services will hinder financial flexibility.

BEIJING, July 25, 2021 /PRNewswire-Asia/ -- New Oriental Education & Technology Group Inc. ("New Oriental" or the "Company") (NYSE: EDU and SEHK: 9901), the largest provider of private educational services in China, announced that, on July 24, 2021, China's official state media, including Xinhua News Agency and China Central Television, announced the Opinions on Further Alleviating the Burden of Homework and After-School Tutoring for Students in Compulsory Education (the "Opinion"), issued by the General Office of the CPC Central Committee and the General Office of the State Council.  The Opinion contains high-level policy directives about requirements and restrictions related to after-school tutoring services, including (i) institutions providing after-school tutoring services on academic subjects in China's compulsory education system, or Academic AST Institutions, need to be registered as non-profit, no approval will be granted to new Academic AST Institutions, and an approval mechanism will be adopted for online Academic AST Institutions; (ii) foreign ownership in Academic AST Institutions is prohibited, including through contractual arrangements, and companies with existing foreign ownership need to rectify the situation; (iii) listed companies are prohibited from raising capital to invest in businesses that teach academic subjects in compulsory education; (iv) Academic AST Institutions are prohibited from providing tutoring services on academic subjects in compulsory education during public holidays, weekends and school breaks; and (v) Academic AST Institutions must follow the fee standards to be established by relevant authorities. The Opinion also provides that institutions providing after-school tutoring services on academic subjects in high schools (which do not fall within China's compulsory education system) shall take into consideration the Opinion when conducting activities.

The Company will follow the spirit of the Opinion and comply with relevant rules and regulations when providing educational services. The Company is considering appropriate compliance measures to be taken, and expects such measures to have material adverse impact on its after-school tutoring services related to academic subjects in China's compulsory education system.  The Company will proactively seek guidance from and cooperate with the government authorities in connection with its efforts to comply with the Opinion and any related rules and regulations.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. New Oriental may also make written or oral forward-looking statements in its reports filed or furnished to the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about New Oriental's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: our ability to attract students without a significant decrease in course fees; our ability to continue to hire, train and retain qualified teachers; our ability to maintain and enhance our "New Oriental" brand; our ability to effectively and efficiently manage the expansion of our school network and successfully execute our growth strategy; the outcome of ongoing, or any future, litigation or arbitration, including those relating to copyright and other intellectual property rights; competition in the private education sector in China; changes in our revenues and certain cost or expense items as a percentage of our revenues; the expected growth of the Chinese private education market; Chinese governmental policies relating to private educational services and providers of such services; health epidemics and other outbreaks in China; and general economic conditions in China. Further information regarding these and other risks is included in our annual report on Form 20-F and other documents filed with the Securities and Exchange Commission. New Oriental does not undertake any obligation to update any forward-looking statement, except as required under applicable law. All information provided in this press release and in the attachments is as of the date of this press release, and New Oriental undertakes no duty to update such information, except as required under applicable law.

About New Oriental

New Oriental is the largest provider of private educational services in China offering a wide range of educational programs, services and products to a varied student population throughout China. New Oriental's program, service and product offerings consist of K-12 after-school tutoring, test preparation, language training for adults, pre-school education, primary and secondary school education, education materials and distribution, online education, and other services. New Oriental is listed on NYSE (NYSE: EDU) and SEHK (9901.SEHK), respectively. New Oriental's ADSs, each of which represents one common share. The Hong Kong-listed shares are fully fungible with the ADSs listed on NYSE.

For more information about New Oriental, please visit http://www.neworiental.org/english/.

Contacts

For investor and media inquiries, please contact:

Ms. Sisi Zhao
New Oriental Education & Technology Group Inc.
Tel: +86-10-6260-5568
Email: zhaosisi@xdf.cn

Ms. Rita Fong / Ms. Charlotte Cheung
FTI Consulting
Tel: +852 3768 4548 / +852 3768 4732
Email: rita.fong@fticonsulting.com / charlotte.cheung@fticonsulting.com

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SOURCE New Oriental Education and Technology Group Inc.

FAQ

What are the new regulations affecting New Oriental (EDU)?

The new regulations mandate non-profit registration for tutoring services, prohibit foreign ownership, and restrict capital raising for academic tutoring in China's compulsory education system.

When were the new regulations announced that impact New Oriental's services?

The new regulations were announced on July 24, 2021.

How will the new regulations affect New Oriental (EDU) financially?

The company expects significant adverse impacts on its academic after-school tutoring services, potentially limiting revenue and growth.

Can New Oriental (EDU) raise capital for after-school tutoring under the new rules?

No, the new regulations prohibit listed companies from raising capital for academic tutoring services.

What must New Oriental (EDU) do to comply with the new regulations?

New Oriental must register as a non-profit for its tutoring services and cooperate with government authorities to ensure compliance.