HomeBusinessInvestingChina Online Ed Stocks Fizzled; So Is “EdTech” Market Dead?

China Online Ed Stocks Fizzled; So Is “EdTech” Market Dead?

Most students around the world are still in school, full time. It’s not 2020 anymore. Thankfully. But that was a time when every investor was buying anything related to home use – online education platform plays were part of it.

The biggest in the emerging markets were the Chinese names. But they’ve all fizzled out, hit by scandal and geopolitics, primarily, related to investing in China tech stocks. Many of them had ADRs, so they were easy access for retail investors.

Now that students are in school, and even President Biden wants to keep them there, as does the new mayor of America’s biggest city, Eric Adams of New York, is 2022 going to be a boring market for the emerging ed tech players out there?

Let’s look at one of the bigger emerging market education markets – Brazil. They were one of the early entrants to this, along with China.

Over the last month, Brazil’s three biggest education companies by revenue, are doing terrible. It looks even worse over a 12 month period.

The Brazilian stock index, the IBov, is down around 3.6% over the last month of trading. But Cruzeiro do Sul (CSED3) is down 17.9%. Cogna Education (COGN3) is down 19.7%, approaching bear territory already, as is Yduqs (YDUQ3) as investors worry about its debt load.

Then again, those Brazilians are in much better shape than the $2.1 billion Chinese education firm TAL Education Group

. Their share price is down by 34% in four weeks. The longer you look at it, the worse it gets.

New Oriental Education & Technology Group (EDU), with a $3 billion market cap, fired tens of thousands of its employees to start the month. Bloomberg reported on January 10 that it was “the biggest layoff since China embarked on a wide-ranging crackdown on private enterprises more than a year ago.” The Beijing-based company’s stock is down 19% in the last four weeks.

So why are the Russians – seeing their two biggest, most prolific online education BRIC partners in dire straits – wanting to get in on the action?

If the old saying, “you buy when there’s blood in the streets” has any meaning, then this might be the time. Because online education stocks have never looked so dismal. Over the last 12 months, while the MSCI China has fallen by 27.45%, TAL and EDU are down nearly 100%.

Russian Roulette?

Russians, scared?

Come on, man. One of the Moscow’s most well known private equity investors is a buyer, Baring Vostok. They lead an $11 million Series A funding round for Brazilian worker training company EBAC Online in September. The two countries are teaming up in the space, or so it would seem based on recent trends in VC and M&A.

Brazilian online school Mentorama, merged with major Russian EdTech platform Skillbox two months after the EBAC funding round in November.

Skillbox was Russia’s online education leader last year, according to Smart Ranking. They claim to have doubled their year-on-year revenue in the third quarter of 2021 versus 2020. Skillbox has around 500 courses, most of it vocational learning in things like computer programming, marketing and design for Russians looking for new skills, or to upskill without applying to colleges.

Skillbox founder and CEO Dmitry Krutov said that Russians were now embracing the concept of online learning.

Other education platforms in Russia include Like Center, which posted more than 400% revenue growth in the third quarter of 2021 and SkyEng, another portfolio company of Baring Vostok, an online education company targeting K-12. They reported a 200% rise in revenue in the third quarter of last year from the same time in 2020 when everyone was pretty much stuck at home hiding from Covid. SkyEng’s product like SkySmart rus an online adult-education university called Sky Pro.

All of these are private for now.

The Russian online ed market is growing at twice the rate of the global average, based on a report published on VC.Ru, a news portal about Russian venture capital. It’s reportedly growing at 25% compound annual growth rate compared with 13.5% worldwide.


coding bootcamp in Europe, Asia and the United States suggests they are stepping into the arena, too, but nobody will by Yandex (YNDX) for education. Their move there just shows big, corporate investor interest remains as their is no word of Yandex shutting it down.

Russia remains a hotbed of low cost tech talent. If they are not building these online education platforms, they are learning on them, getting proper certification on them, and being hired to work remotely upon receiving them. In theory, this creates more interest in online education services for adults looking to work remotely, or looking for opportunities in non-Russian companies in hopes of migrating, or simply working from home without having to live in costly Moscow or Saint Petersburg.

Still a U.S. Market. China No. 2.

Online education grew thanks to the pandemic. But it has been a growing market for a while, primarily for professionals who didn’t want to quit their day job to attend college classes. The online education market sprung up to meet their needs.

In the first half of 2021, venture capitalists funneled a record $10 billion into EdTech companies, bringing the total number of “unicorns” in the sector to 27.

The last few months have been nasty.

Last March, California-based online education firm Coursera (COUR) raised $518 million and brought them to a $4.3 billion valuation. Another California based online education startup Udemy (UDMY) raised around $3 billion in October. Both of these stocks have been crushed as K-12 students are no longer glued to their Chrome books on the kitchen table. Even if these companies have nothing to do with the K-12 market (UDMY surely does not), perception is hurting them. Share prices of both companies are down by close to 50% since their debut on Wall Street, worse than the emerging market companies in the space.

Still, the EdTech market is expected to grow by nearly $113 billion from 2020 to 2025, according to recent research from Technavio. The United States is expected to account for nearly half of this growth.

Emerging markets will be the place to look for the newcomers, like Russia, which seems the place to be for new names in the near future. But if you are looking for distressed stocks, the two U.S. firms listed above might be as bloodied as they come.

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