Damning Report On RYB Education Impacting Other Education Stocks

U.S.-listed Chinese education stocks are getting hammered on Friday after the South China Morning Post reported that RYB Education Inc – ADR RYB is under investigation for alleged child abuse. Shares of RYB crashed nearly 40 percent in early Friday trading, but U.S. investors were dumping other Chinese education stocks as well out of fears there may be widespread fallout from the allegations.

The initial report by Xinhua was covered by South China Morning Post on Thursday, and the accusations are sickening. According to Xinhua, RYB has suspended multiple teachers at RYB Education New World after kindergarten students claimed that they had been given unidentified pills and brown syrup, been forced to undress and locked in a dark room. 

Parents reported that at least eight children have been abused at the school and that the children are giving similar accounts of what occurred. 

“Different parents have asked their kids if it happened — all of them said yes,” one father said in an interview. “When we asked which three children, all of our kids gave the same three names.”

Beijing police are investigating the accusations, and the Chaoyang District education commission has assigned a special task force to handle the situation. A spokesperson for RYB Education told the state-run People’s Daily there is no evidence to support the parents’ allegations and the police investigation is still ongoing.

Investors were dumping RYB stock on Friday, which just held its U.S. IPO in September. Here’s a look at how other Chinese education stocks were trading:

• New Oriental Education & Tech Grp (ADR) EDU was down 2.7 percent.
• Bright Scholar Education Holdngs Ltd-ADR BEDU was down 3.8 percent.
• Hailiang Education Group Inc (ADR) HLG was down 2.5 percent.

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