China's big profit ban for edtech, Billions wiped out, stocks collapse 40%

The $100 billion education tech or edtech sector has had a torrid weekend with China banning companies that teach the school curriculum from making profits, raising capital or going public.

So basically none of the tutoring companies will be allowed to list and would have convert to being a not-for-profit entity. This wipes out billions worth of investments by Private Equity (PE) in the sector.

Temasek, Sequoia China, Tiger, SoftBank Vision Fund, Warburg Pincus are just few of the big PE players invested in China's top 4 edtech firms. According to Bloomberg online education platforms attracted about 103 billion yuan of capital in 2020 alone in China.

Here is a complete list of the new Regulations for China’s Education Sector:

• Companies and institutions that teach the school curriculum must go non-profit
• Such institutions cannot pursue IPOs, or take foreign capital
• Listed companies will be prohibited from issuing stock or raising money in capital markets to invest in school-subject tutoring institutions, or acquiring their assets via stock or cash
• Foreign firms are banned from acquiring or holding shares in school curriculum tutoring institutions
• All vacation and holiday curriculum tutoring is off-limits
• Online tutoring and school-curriculum teaching for kids below six years of age is forbidden
• Agencies cannot teach foreign curriculums or hire foreigners outside of China to teach