Sept. 5 (Bloomberg) -- Trading in Ambow Education Holding Ltd. was halted after the private tutoring services provider said it will start a probe into its units following a report by China’s state television.
Ambow’s shares sank 27 percent to $2.27 at 2:58 p.m. before trading was suspended in New York. It was the biggest retreat since the company’s initial public offering in the U.S. in August 2010.
China’s Central Television said on Sept. 3 that Ambow’s one-on-one education unit exaggerated staff training results and that the schools’ registrations with industry regulators were incomplete, according to a statement by Ambow posted yesterday. Ambow said it will start an investigation into the issues “immediately,” discipline the persons involved and take corrective steps.
“It’s disconcerting,” Trace Urdan, an analyst at Wells Fargo & Co., said in a phone interview from San Francisco. “It’s not like they’re asserting financial fraud but this is coming from state television, which is serious. This definitely keeps Ambow in the penalty box for some additional period of time.”
It’s not the company’s policy to encourage staff to exaggerate training results, Ambow Chief Strategy Officer Jenny Zhan said in a phone interview today from Beijing. “The company’s investigation on the CCTV allegations is still ongoing, which doesn’t mean we admit everything the TV report said,” she said, adding the company will publish a statement after the investigation.
The Jinghan unit, which focuses on one-on-one tutoring, accounts for about 5 percent of Ambow’s 2011 profit, and about 20 percent of Ambow’s revenue, according to Zhang.
Beijing-based Ambow announced a plan July 13 to buy back as much as $10 million of its outstanding shares after a 68 percent slump in the prices since the beginning of the year.
The company said on July 4 that then-Chief Financial Officer Gareth Kung had resigned. Kung was appointed CFO at Semiconductor Manufacturing International Corp. on July 9.
Ambow Education reported a $12.7 million net loss for the first quarter on July 4, compared with $2 million net income for the same period in 2011. KJ Tan, Ambow’s vice president of finance, was appointed as acting finance chief.
New Oriental, Tal
New Oriental Education & Technology Group Inc., China’s largest private education services provider, tumbled 57 percent over two days after saying on July 17 the U.S. Securities and Exchange Commission was investigating the company while Muddy Waters LLC questioned its accounting practices in a report a day later.
Tal Education Group, a provider of after-school tutoring services based in Beijing, released a statement on July 19 saying the New York Stock Exchange contacted it “in accordance with its usual practice” and the company’s policy is not to comment on “unusual market activity or speculative matters.” Its shares plunged 14 percent that day in New York.
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