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New Oriental Education & Technology Group Inc. Message Board

  • enzhang0125 enzhang0125 Jun 17, 2013 3:44 PM Flag

    is the EDU really want to buyout?

    i read a story in which described the EDU will be boughtout in second half of year. Maybe that is true, maybe is not, How do you think?

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    • It will never happen. The clues were already given, and supported by the fact that New Oriental can't raise the capital and that their business is faltering quickly. For those who don't know, the rumor published in China was that New Oriental management "may consider taking the company private" if "the stock price stays low."
      1. The stock price is up nearly 25% since that rumor was published on a Chinese blog
      1.1 New Oriental management didn't "consider" purchasing back their stock when it was trading at $10
      1.2 The rumor was published on a Chinese blog right after the stock reversed after the last earnings announcement that saw a 10% decline in the share price from day's high to day's low (i.e.,
      2. Insiders own only about 1% of the stock (i.e., they can't afford it on their own, not even close)
      2.1 No Chinese bank will lend the multiple billions needed for New Oriental to go private because there is no growth in the company, market share is falling dramatically, and the Chinese economy is slowing down
      3. The privitization rumor was created to support the stock price. Management is doing everything they can in the near term to prop up the stock to give large shareholders an opportunity to exit. Four insider/block holders, including Tiger, filed to sell tens of millions of their shares this past May.
      3.1 Management threw out a tiny share buyback (relative to market cap)
      3.2 Management hinted at a dividend--why on earth would this be a good thing? This is admission that New Oriental is not a growth stock anymore!
      You also know from my posts that activity at New Oriental has been extremely light in recent weeks--enrollments are down huge and few are signing up for summer training sessions. With high margins of the training product damaged, overall margins will drop substantially. Recall that after beating analyst estimates last quarter, New Oriental did not raise guidance...because they already could see that demand and market share were cratering.

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