RYB shares plunge even after US$50m buy-back, as investors flee stock amid abuse claims

PUBLISHED : Saturday, 25 November, 2017, 1:29pm
UPDATED : Saturday, 25 November, 2017, 1:31pm

Shares of RYB Education plunged almost 40 per cent in New York trading overnight, falling below their September initial offering price, as investors bailed out of the Chinese preschool operator while Beijing police began investigations into claims of abuse and molestation at one of the school’s kindergarten in the Chinese capital.

Shares fell to US$16.45, below their September IPO price of US$18.50, even after the company announced a US$50 million buy-back of its own stock over the next 12 months, financing the repurchase out of its existing cash balance.

“There will be no change in our business strategy which has always been focused on the kids,” RYB’s chief financial officer Wei Ping said during a conference call on Friday night with analysts, investors and the media.

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Beijing’s police began investigating claims that children at RYB’s New World kindergarten had been molested, abused, found with needle marks and were fed with unidentified pills. Teachers involved in the alleged abuses had been suspended from duty, the operator said in a notice on its official microblog site on Thursday.

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The news sparked outrage on Chinese social media, and angry parents gathered at the school’s gate in Beijing’s winter freeze, demanding explanations by the operator.

Police would inform RYB of the action they would be taking, the company’s founder and chief executive Shi Yanlai said on the same conference call, without elaborating.

Established in 1998, RYB runs a network of more than 1,800 kindergartens and day care centres in around 300 Chinese cities. RYB are acronyms for red, yellow and blue. The operator’s first-half net profit rose 19.5 per cent to US$4.9 million, mainly through increased kindergarten enrolment and a rapid expansion of its franchise.