China-based Education saw 13 IPOs and 21 M&A in 2020
2021-02-21 20:58:44


The COVID-19 pandemic takes variable shapes and forms in how it affects all walks of life. But amid such a chill environment, the outbound listing frenzy of China’s edtech companies continued, and the industry players also showed strong performance in the stock market.

Plus, there is a trend that the U.S. listed Chinese companies like New Oriental conduct share sales in Hong Kong as a way to broaden their investor, further, a hedge against the tense international situation. 


According to the open data, in 2020, 13 China-based education enterprises have been listed covering different sub-sectors such as K-12, vocational education, and online education, out of which 5 companies were listed in Hong Kong stocks, 1 in A-share (domestic market), and the other in the US stocks.

Firstly, let’s look at the trajectory of stock price fluctuation experienced by China-based education companies in 2020. Open data shows that there are 37 Chinese education companies whose share prices have risen during last year, and 15 have increased by more than 50%.

According to Blue Elephant Capital, while the stock prices of the long-standing leaders, TAL and New Oriental, increased by 40% and 50%, respectively, those of the newcomers, Youdao, and the controversial GSX were up by 90% and 300%. And it is worth mentioning that short-selling attacked GSX 14 times during the last year.


In 2020, three of the China-based education companies achieved the market value exceeding 100 billion yuan, including TAL, New Oriental, and Chinese leading vocational education services provider Offcn(002607). This shows the stability of the valuation of leading companies, but it can also be understood that very few companies have found mature profit models and could be recognized in the secondary market.

It’s easy to find that K-12 stocks performed well last year, mainly due to the rapid growth of the online sector driven by the propensity for a severe COVID-19 epidemic in the first half. At the same time, the giants accelerated their expansion to the market out of metro cities. According to the data from Tencent, among the new buyers paying for K-12 online education products, only 20% were from first-tier and new first-tier cities, and users in third-tier and below cities account for about 40%.

With no obvious differences in teaching content, operation mode, and teaching staff, K12 online education companies have to attract target customers by launching various free or cheap trial lessons, leading to a skyrocketed cost of advertising reflected in the latest financial results. GSX, Koolearn, and 17 Education's sales expense rates reached 82%, 81%, and 105%, respectively in the latest fiscal quarter, setting new highs in the past year.

As the epidemic eased in the middle of the year, offline education began to recover and the dividends of online traffic gradually faded. Whether this cash-burning war can accelerate the formation of the final structure in the industry remains a mystery.

Affected by the epidemic, civil service exams and many qualification examinations in the first half of 2020 were delayed or canceled. Given that offline businesses have to suspend, the revenue growth of vocational education companies also slowed down. In the second half of 2020, as the epidemic eased and employment pressure increased, the vocational education market's growth rebounded significantly from the third quarter. 

As shown from the table showing at the beginning of this piece, vocational education and K12 have always been the most popular secondary education sectors. However, it is worth noting that compared with the previous two years, breakthroughs have come to the sectors of early childhood education and competency-based education. For education companies under the dual pressure of policy supervision and the epidemic, this is a signal of more possibilities and space for asset securitization in these tracks. It is expected that IPOs in the education industry will cover more segments in the future.


According to Duojing Capital’s incomplete statistics, as of December 16, there were 21 mergers and acquisitions in the education industry in 2020. Nine deals completed on the track of educational informatization, followed by vocational education(6). And early childhood education, K12 training, as well as competency-based education sectors saw 2 cases, respectively.

No companies could completely get rid of the impact of the epidemic, but the education industry performs better in a weak economy than others. Last year, capital has become more cautious and the investment has been gathered to the leading companies. 

Capitals sometimes are just the icing on the cake and “combustion aid”. In the education industry, content and services are the ultimate weapons for education companies to secure victory. And companies should be keen on optimizing the business model to create real value for customers.

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