Leave Them Kid Stocks Alone
Last Friday, Bill Hwang, awash in leverage from Morgan & Goldman, triggered a $30b liquidation event that included quite a few China tech stocks.
Hwang is mentee of hedge-fund hero Julian Robertson, btw, so fingers must remain pointed at Wall Street for blame. Not that blaming will help in recovery of the many Chinese education stocks which took a tumble, after Hwang unloaded a bundle of GSX Techedu.
Fact is, such stocks were already troubled by rumors of an impending regulatory crackdown on such homework and test-prep companies. It is quite reasonable to assume such a crackdown is coming: the proliferation of such companies has led to steadily declining quality, mounting false claims, and exploitation of tutors, all for that ultimate reward of a public listing.
“Even if it’s bad for ed-tech stocks right now, long-term, this regulation will be good for the industry,” says Jimmie Jeremejev. “Chinese parents’ mania for tutoring is not being capitalized on, it’s being exploited, as are a growing number of teachers, by companies that value short-term profit over a viable organization. So we’re risk off all China ed-tech currently.”