The company expects to win big from the overseas markets outside China.
China Online Education Group (COE:NYSE), or 51Talk, announced on June 24 that it would split its English tutoring businesses in the Chinese mainland, with the aim to fully leverage on overseas business.
The company denoted that it has entered into a definitive share purchase agreement with Dasheng Holding (HK) Limited, an entity controlled by Jiajia Huang, chairman of the board of directors and CEO.
Through this entity, Huang will acquire all of 51Talk's online English tutoring business in mainland China, including all associated liabilities and assets, for a nominal sum of USD 1. The deal will close on or about June 30, 2022, per 51Talk. "We expect to shift from a negative net assets position to a positive net assets position after the closing of the spin-off transaction."
51Talk reported net revenue of USD 9.5 million in Q1 this year, down 89.7% year on year. Specifically, revenue from overseas business in Q1 totalled USD 1.9 million, which achieved a positive cash flow in a single month for the first time in March.
The net loss for the reporting period was USD 21.2 million, compared to a net profit of USD 1.2 million in the same period of the previous year.
In terms of expenses, 51Talk's total operating expenses declined 70% year on year to USD 20.6 million in Q1 2022. This was mainly due to lower sales and marketing expenses and product development expenses.
After divesting the mainland business, 51Talk will fully focus on the overseas market. It takes the Southeast Asian market as its entry point, and will gradually tap into the Middle East, Europe and America in the future.
At present, 51Talk has provided English teaching services for global students in more than 50 countries and regions around the world.
Market research firm Grand View Research reports that the global education technology market was approximately USD 107.3 billion in 2021 and is expected to grow at a CAGR of 19.9% through 2028. Many companies are jostling for a piece of pie, they include VIPKID, Acadsoc (Chinese: 阿卡索) and Ehailuo (Chinese: 云海螺).
As of press time, the company closed at USD 1.20 apiece with a market cap of USD 26.73 million.