Once Accused of Child Abuse, the Chinese Preschool Chain is Seeking Expansion

RYB Education, an NYSE-listed Chinese preschool company that was in the news because of child-abuse allegations, is now acquiring a major stake in a Singapore-based private childhood education company, Dai1 Media reported.

In November 2017, two months after RYB Education went public in the United States, some parents accused the company’s kindergartens in China of abusing kids, citing needle marks they found on their children, according to local media reports.

Although Beijing police later closed the investigation, saying that it found no evidence of impropriety, the allegations had ignited public anger on China’s social media platforms. The company’s shares then fell almost 40% in a single day.

If it was the first blow to the company, the company suffered another major loss in November 2018, when the Chinese government published a new regulation prohibiting publicly listed companies from investing in or acquiring private preschools. It also banned private preschools from going public.

The regulation led to a slash on RYB’s profits, especially those attributable to franchising, and a plunge of its shares, which dropped more than 50% overnight.

Considering all these factors, I think the latest acquisition indicates that the preschool chain is transforming its business in order to survive.

The company said in a statement that “the international English and bilingual curriculum, along with the high-quality education management team we are acquiring, will generate great synergy with our China-based operations and enhance our competitive edge in our core China early childhood education market.”

“This announcement, together with our prior acquisitions and alliances, exemplifies our strategic and measured diversification across multiple business lines, products, and geographies,” it added.