Lixiang Education Announces Plan to Implement ADS Ratio Change

Rhea-AI Summary

Lixiang Education Holding Co., (NASDAQ: LXEH), a private education service provider in China, has announced plans to change its American Depositary Shares (ADS) ratio from 1 ADS to 10 ordinary shares to 1 ADS to 100 ordinary shares. This change, effective around September 30, 2024, will have the same effect as a one-for-ten reverse ADS split.

ADS holders in the Direct Registration System and The Depository Trust Company will have their ADSs automatically exchanged. Fractional new ADSs will be aggregated, sold, and the net proceeds distributed to applicable ADS holders. The company's ADSs will continue trading on the Nasdaq Global Market under the symbol 'LXEH'. This change will not impact the underlying ordinary shares of the company.

Positive

• Potential to maintain Nasdaq listing compliance by increasing ADS price
• No impact on underlying ordinary shares structure
• Automatic exchange process for ADS holders, requiring no action from investors

Negative

• Potential for short-term stock price volatility
• Reduction in total number of outstanding ADSs may affect liquidity
• Possible loss of value for investors holding fractional ADSs

Insights

Financial Analyst

The announced ADS ratio change is a significant corporate action that could impact LXEH's stock price and liquidity. This 1:10 reverse split effectively reduces the number of outstanding ADSs, potentially increasing the per-share price. While this move might help maintain NASDAQ listing requirements, it doesn't fundamentally change the company's value.

Investors should note that such actions often signal management's concern about low share prices. It's important to examine LXEH's underlying financials and growth prospects. The lack of a clear strategic rationale for this move raises questions about the company's long-term outlook in China's competitive private education sector.

Shareholders should be aware of potential fractional share liquidation and its tax implications. Overall, this technical change doesn't address core business challenges and may be viewed as a cosmetic fix rather than a fundamental improvement.

Market Research Analyst

This ADS ratio change by Lixiang Education reflects broader trends in the Chinese education sector. The industry has faced significant regulatory headwinds, impacting investor sentiment and stock valuations. LXEH's move could be seen as an attempt to improve market perception and attract institutional investors who may have minimum share price requirements.

However, it's important to consider the underlying market dynamics. China's private education landscape remains challenging, with ongoing policy shifts and increased government scrutiny. Investors should closely monitor how LXEH adapts its business model to navigate these changes.

The timing of this announcement, amidst sector-wide challenges, suggests LXEH may be struggling to maintain investor confidence. It's essential to compare this move with peers' strategies and evaluate LXEH's competitive positioning in this evolving market.

LISHUI, China, Sept. 13, 2024 (GLOBE NEWSWIRE) -- Lixiang Education Holding Co., Ltd. (the “Company” or NASDAQ: LXEH), a prestigious private education service provider in China, today announced that it plans to change the ratio of its American depositary shares (“ADSs”) to its ordinary shares (the “ADS Ratio”), par value US$0.0001 per share, from the current ADS Ratio of one (1) ADS to ten (10) ordinary shares to a new ADS Ratio of one (1) ADS to one hundred (100) ordinary shares (the “ADS Ratio Change”). The Company anticipates that the ADS Ratio Change will be effective on or about September 30, 2024 (the “Effective Date”).

For the Company’s ADS holders, the change in the ADS Ratio will have the same effect as a one-for-ten reverse ADS split. On the Effective Date, holders of ADSs in the Direct Registration System (“DRS”) and in The Depository Trust Company (“DTC”) will have their ADSs automatically exchanged and need not take any action. The exchange of every ten (10) then-held (existing) ADSs for one (1) new ADS will occur automatically, at the Effective Date, with the then-held ADSs being cancelled and new ADSs being issued by the depositary bank.

No fractional new ADSs will be issued in connection with the ADS Ratio Change. Instead, fractional entitlements to new ADSs will be aggregated and sold by the depositary bank and the net cash proceeds from the sale of the fractional ADS entitlements (after deduction of fees, taxes and expenses) will be distributed to the applicable ADS holders by the depositary bank.

The Company’s ADSs will continue to be traded on the Nasdaq Global Market under the symbol “LXEH.” The ADS Ratio Change will have no impact on the Company’s underlying ordinary shares, and no ordinary shares will be issued or cancelled in connection with the ADS Ratio Change.

About Lixiang Education Holding Co., Ltd.

Founded in Lishui City, China, Lixiang Education Holding Co., Ltd. is a prestigious private education service provider in Zhejiang Province. The Company’s education philosophy is to guide the healthy development of students and to establish a solid foundation for their lifelong advancement and happiness. For more information, please visit: www.lixiangeh.com. 

Safe Harbor Statement

This press release contains statements that may constitute “forward-looking” statements pursuant to 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,” “aims,” “future,” “intends,” “plans,” “believes,” “estimates,” “likely to,” and similar statements. The Company may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), in its annual report 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 the Company’s beliefs, plans, 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: the Company’s strategies, future business development, and financial condition and results of operations; the expected growth of the Chinese private education market; Chinese governmental policies relating to private educational services and providers of such services; the Company’s ability to maintain and enhance its brand. Further information regarding these and other risks is included in the Company’s filings with the SEC. All information provided in this press release is as of the date of this press release, and the Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

For more information, please contact:

Siyi Ye
Tel: +86-578-2267142
Email: irlxeh@lsmxjy.com

FAQ

What is the new ADS ratio for Lixiang Education (LXEH) and when will it be effective?

Lixiang Education (LXEH) plans to change its ADS ratio from 1:10 to 1:100 (1 ADS to 100 ordinary shares), effective around September 30, 2024.

How will the ADS ratio change affect Lixiang Education (LXEH) shareholders?

The change will have the same effect as a one-for-ten reverse ADS split. Existing ADS holders will have their ADSs automatically exchanged, with every 10 current ADSs becoming 1 new ADS.

Will Lixiang Education's (LXEH) stock symbol or exchange listing change due to the ADS ratio adjustment?

No, Lixiang Education's ADSs will continue to trade on the Nasdaq Global Market under the symbol 'LXEH' after the ADS ratio change.

What happens to fractional ADSs resulting from Lixiang Education's (LXEH) ratio change?

Fractional new ADSs will be aggregated and sold by the depositary bank, with net cash proceeds distributed to applicable ADS holders after deducting fees, taxes, and expenses.