Chinese edtech sector to have its first IPO since education crackdown

Fenbi Education, a Chinese edtech platform catered to adult learners, filed for an initial public offering in Hong Kong on Monday, according to the Chinese media outlet Sina Tech.

Why it matters: Fenbi’s listing is the first IPO from China’s edtech industry since last July, when the once-booming sector was hit by a series of regulatory crackdowns on curriculum tutoring services targeting students up to the 12th grade (K-12).

• Fenbi, which means “chalk” in Chinese, provides online and offline test preparation services for adult professionals, as well as vocational training. It focuses on offering courses for various tests such as the civil officer examinations, teacher qualification certificates, and postgraduate entrance examinations.

READ MORE: Chinese edtech upended by sweeping regulations

Details: Fenbi said it plans to go public in Hong Kong but did not disclose the size of the IPO. Bloomberg reported on Monday that the firm could raise about $300 million. China International Capital Corporation, Citibank, and BofA Securities will serve as co-sponsors for the listing.

• The fund will be used to develop courses, enhance student recruitment, and improve technological capacity and digital infrastructure, according to the company.
• The company’s revenue reached RMB 2.6 billion ($416 million) in the first nine months of 2021, up 80% year-on-year. However, while Fenbi’s revenue expanded, its net loss also widened, almost doubling from RMB 362 million in 2020 to RMB 782 million over the first nine months of 2021.
• Fenbi’s average monthly active users increased by 38% year-on-year from 4.7 million in 2020 to 6.5 million in 2021, slowing from the 62% growth rate for 2020. Since its founding, paid users have reached 45.3 million in December 2021.
• Founded in 2015, the company now operates in 260 cities across 31 provinces, autonomous regions, and municipalities in China.
• Fenbi’s CEO Zhang Xiaolong, who shares the same name as the better-known Tencent vice president and “father of WeChat”, holds a 35% stake in the company. Tencent owns 14% of the company and other shareholders include IDG, Matrix Partners, and Hillhouse Capital.

Context: Fenbi is an early entrepreneurial effort from the team behind the online tutoring app Yuanfudao, before the edtech unicorn decided to focus on the more lucrative K-12 segment.

• In February 2021, the firm raised $390 million in a Series A led by IDG Capital and Trustbridge Partners.