Boom-to-bust: With crackdown on edu sector, Chinese billionaires lose billions
Virendra Pandit
New Delhi: With China cracking down on its own billionaires, Larry Chen, who spectacularly metamorphosed from being a school teacher to become an education sector tycoon in seven years, has lost USD 15 billion.
By scaling up his private education business, Chen had become one of the planet’s richest people, but his fortunes dwindled in a few months to USD 336 million, media reported on Monday.
Chen, who founded Gaotu Techedu Inc., was Chairman and CEO of the company. His shares in the online tutoring platform plunged by almost two-thirds in New York trading last Friday on reports of the regulatory overhaul by the Chinese government.
The founder-chairman and chief executive officer of Gaotu Techedu Inc., Chen is now worth only USD 336 million after shares in his online-tutoring firm plunged by almost two-thirds in New York trading on Friday on reports of the regulatory overhaul.
On Saturday, Beijing released new regulations banning companies that teach school curriculums from making profits, or raising capital, or going public. Chen had shed more than USD 15 billion in wealth since late January as Gaotu’s stock tumbled.
Gaotu “will comply with the regulations and fulfill social responsibilities,” Chen said in a statement on Weibo, a Chinese Twitter-like microblogging service, late on Saturday night.
Another billionaire witnessed the same fate. TAL Education Group CEO Zhang Bangxin’s fortune also fell by USD 2.5 billion to USD 1.4 billion after the firm’s shares plunged 71 percent in New York on Friday last.
New Oriental Education & Technology Group Inc. Chairman Yu Minhong also lost his billionaire status, shedding USD 685 million and leaving him with a stake value of USD 579 million after the firm’s share price tanked 54 percent.
Chen, who founded Gaotu, formerly called GSX, in 2014 and saw the stock rise more than 13-fold from its debut in 2019 until January 27, 2021, high. But Gaotu’s shares have since lost 98 percent of their value.
China’s severest curbs on the USD 100 billion private-tutoring and online education sector have hit investors with platforms losing their ability to go public, depriving their backers of exits, and foreign capital being banned from the sector.
