NetEase e-learning unit slashes New York IPO target to avoid fate of rival Chinese online education platforms
- Online education in China is expected to be worth 300 billion yuan (US$42.4 billion) this year and reach 540 billion yuan by 2022
- Only 5 per cent of China’s online education businesses for pre-college students are profitable, according to one estimate
When the e-learning unit of Chinese internet giant NetEase slashed its New York Stock Exchange IPO target by half, it might have seemed like another casualty of the ongoing trade war between the world’s two biggest economies.
The real reason was closer to home: China’s online education sector has expanded rapidly in recent years but providers are having a hard time making money.
Youdao Inc, of which NetEase owns more than 60 per cent, is set to price its shares at between US$15 and US$18 each, according to a recently updated filing with the US Securities and Exchange Commission. That adds up to about US$116 million in IPO funds, down from a target of US$300 million three weeks ago.
Despite achieving 100 million monthly active users this year, Youdao recorded a net loss of US$24 million in the first half, more than double its loss a year earlier.
Youdao said in the filing that one of its main challenges was to “monetise the user bases”. Ahead of the listing, expected to take place as early as Friday, Youdao does not want to repeat the experience of New York-listed rivals that have been trading far below their debut prices and have struggled to turn profitable.
