China's Global Education Opens Up 14% Post-IPO
October 08 2010 - 11:53AM
Dow Jones News
Foreign language training specialist Global Education and
Technology Group Ltd. (GEDU) wrapped up another week of U.S.
initial public offerings of Chinese companies with early gains
Friday.
The company's stock opened at $12 a share on the Nasdaq, up 14%
from its initial public offering price of $10.50, but gave up some
of those gains in early trading. It was recently changing hands at
$11.30, up 7.6% for the session. The company sold 6.4 million
American Depositary shares at the high end of its expected range of
$8.50 to $10.50.
Global Education focuses on foreign language training and test
preparation in China, and claims to be the leading test prep
company in China for the International English Language Testing
System, or IELTS, with the largest market share in terms of revenue
and student enrollments in 2009.
IELTS has become the most widely taken test of English-language
proficiency for Chinese studying abroad. IELTS scores are used in
the United Kingdom, Australia and New Zealand, and increasingly in
the U.S., which historically has relied on the Test of English as a
Foreign Language, or TOEFL.
Global Education is capitalizing on the increasing interest
among Chinese students to study abroad, and the need to demonstrate
proficiency in a foreign language, especially English. The number
of IELTS test takers in China has increased from about 90,000 in
2005 to about 320,000 in 2009, and Global Education has expanded
its network of centers since opening its first in Beijing in 2001.
It now has 292 owned and franchised learning centers focused on the
IELTS, 144 devoted to helping children learn English, and 30 that
specialize in science, non-English languages or after-school
tutoring.
The company has started online training and test prep courses,
with more than 1 million registered members as of June 30.
Total net revenue increased at the company throughout the
economic downturn. Net income grew in 2008 and 2009, but was down
26% in the first half of 2010 compared to the same period of 2009.
The decline in profits stemmed from foreign-exchange losses, and a
change in fair value related to an acquisition.
Global Education faces a lot of competition in its space,
including from New Oriental Education and Technology Group Inc.
(EDU), which went public in the U.S. in 2006.
Credit Suisse Group (CS) and Bank of America-Merrill Lynch (BAC)
managed Global Education's offering.
Also trading for the first time Friday were shares from
Ellington Financial LLC (EFC), a specialty finance company that
invests in mortgage-backed securities.
The stock opened at $21.50 on the New York Stock Exchange, down
4.4% from its IPO price of $22.50. It was recently trading at
$21.99, down 2.3%. The company sold 4.5 million shares at the lower
end of its expected range of $22 to $24, which was set by
underwriters Deutsche Bank AG (DB) and Cantor Fitzgerald.
Connecticut-based Ellington Financial LLC was formed in 2007 and
specializes in acquiring and managing mortgage-related assets, such
as residential mortgage-backed securities.
As of June 30, 2010, Ellington held residential mortgage-backed
securities with a net value of about $157.2 million, derivatives
contracts with a net value of $128.1 million, and had total
shareholders' equity of approximately $294.4 million. Its net
increase in shareholders' equity from operations for the six months
ended June 30, 2010 and 2009 was $11.3 million and $50.4 million,
respectively. The majority of the period-over-period decline was
due primarily to a reduction in net realized and unrealized gains
related to mortgage securities it held that aren't backed by
government-sponsored agencies like Fannie Mae (FNMA) and Freddie
Mac (FMCC).
--By Lynn Cowan, Dow Jones Newswires; 301-270-0323;
lynn.cowan@dowjones.com
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