At the sprawling Beijing headquarters of Gaotu Techedu, one of the world’s biggest online education businesses, staff are braced for the worst after the group lost over 90% of its market value in a matter of months, reported the Financial Times.
“They’ve been laying people off these last few days,” said one employee this week as he left the building after being made redundant. “Everyone is worried,” said another. “It’s not our turn yet but I feel like we are just waiting for it.” The upheaval for engineers and teachers at US-listed Gaotu comes after regulators launched a sweeping clampdown on China’s $100 billion education industry at the weekend.
Companies can no longer make a profit from selling core tutoring services aimed at children, a model that has underpinned years of explosive growth and drawn in billions of dollars of funding from US investors that the new rules ban from participating in the sector.
Industry leaders, which also include New Oriental and TAL Education, are now scrambling to reorientate their business models after their main revenue source, middle-class parents purchasing tuition to help their children pass China’s competitive public exams, was cut off. Goldman Sachs estimates the regulatory assault will shrink the industry down to a quarter of its present value.