(CapitalWatch, Nov. 18, New York) Golden Sun Education Group Ltd. has picked up its U.S. IPO efforts after a half-year delay, hoping to demonstrate that China's education market still has segments untapped by the recent regulatory crackdown.
Golden Sun seeks to raise up to $22 million on the Nasdaq Capital Market by offering 4.4 million ordinary shares in the range of $4 to $5 apiece. The target was slightly reduced since the company initially filed for a U.S. listing in May.
In its updated prospectus, Golden Sun stated that China's new restrictions in tutoring services do not impact the company's business as its three tutorial centers do not provide academic subjects in the compulsory education system. "As of the date of this prospectus, the Guideline has not impacted the Company's ability to conduct its business, accept foreign investments, or list on a U.S. or other foreign exchange," Golden Sun wrote.
The regulatory crackdown did, however, affect Golden Sun. The company disclosed that it had to divest of its primary or secondary schools education service affiliates, Ouhai Art School and Chongwen Middle School. This was after the new law, effective Sep. 1, prohibited private schools that provide compulsory education to be controlled by agreements or to enter into any transactions with related parties.
The tutorial centers that Golden Sun continues to benefit from offer tutoring for Gaokao, the college entrance exam, as well as specialized high school education, English and other language learning programs. For the six months ended March 31, 2021, the tutorial centers generated 58% of the company's revenue. In addition, the company operates Qinshang Education Technology that provides Spanish language learning to partner schools.
Overall, in the half-year-through March, Golden Sun booked $11.3 million in revenue on $1.6 million in income. In the fiscal year through September 2020, revenue reached $14 million while income was $500,000. The impact of the divestitures are not reflected in these figures.
Golden Sun noted that it expects revenue growth for the year ended September 2021.
Among other risks, Golden Sun is an offshore holding company and its business is conducted by operating China-based entities. Should China revise its rules related to the offshore company structure, that may affect Golden Sun's stock.
Golden Sun has reserved the symbol "GSUN" for its flotation on the Nasdaq. Underwriting the deal is Network 1 Financial Securities, Inc.