First High-School Education Group Co., Ltd. (NYSE: FHS)
NEW YORK, NY – May 16, 2022 –Wolf Haldenstein Adler Freeman & Herz LLP announces that a federal securities class action lawsuit has been filed in the United States District Court for the Southern District of New York against First High-School Education Group Co., Ltd. (NYSE: FHS) American Depositary Shares (“ADSs”) on behalf of all investors who bought shares in or traceable to First High-School Education’s March 2021 initial public offering (the “IPO”).
All investors who purchased the shares of First High-School Education Group Co., Ltd. and incurred losses are advised to contact the firm immediately at email@example.com or (800) 575-0735 or (212) 545-4774.
If you have incurred losses in First High-School Education Group Co., Ltd. you may, no later than July 11, 2022, request that the Court appoint you lead plaintiff of the proposed class. Please contact Wolf Haldenstein to learn more about your rights as an investor in First High-School Education Group Co.
The filed complaint alleges that the IPO’s Registration Statement made inaccurate statements of material fact because defendants failed to disclose the following adverse facts that existed at the time of the IPO:
- that the new rules, regulations, and policies to be implemented by the Chinese government following the Two Sessions parliamentary meetings were far more severe than represented to investors and posed a material adverse threat to First High-School Education and its business;
- that contemplated Chinese regulations and rules regarding private education were leading to a slowdown of government approval to open new educational facilities which would have a negative effect on First High-School Education’s enrollment and growth; and
- that, as a result, the Registration Statement’s representations regarding First High-School Education’s historical financial and operational metrics and purported market opportunities did not accurately reflect the actual business, operations, and financial results and trajectory of First High-School Education at the time of the IPO, and were materially false and misleading and lacked a factual basis.
On May 12, 2021, news reports revealed that the impending government crackdown on for-profit educational companies in China would be much more drastic and far reaching than previously publicly known. Sources stated that anticipated rules would include measures such as banning on-campus tutoring classes, prohibiting tutoring services during weekend hours, and the imposition of industry-wide fee limitations.
Then, on May 14, 2021, China’s state council announced rules that it would further tighten regulations on compulsory education and training institutions. According to an article on fitchratings.com titled “Legal Changes in Private Education in China: Rising Risks for K-12 Education Companies; Higher-Education Providers Benefit,” the new rules “aim to prohibit profit-making in compulsory education,” and “expose K-12 school operators to heightened regulatory risks and their revenue growth may low . . . until they obtain more clarity on how the changes will be implemented.”
Thereafter, on July 23, 2021, China unveiled a sweeping overhaul of its education sector, banning companies that teach the school curriculum from making profits, raising capital, or going public. These drastic measures effectively ended any potential growth in the for-profit tutoring sector in China.
Two months later, on September 28, 2021, First High-School Education revealed that its first half of 2021 revenue was RMB231.9 million, a year-over-year increase of only 24.8%, a steep drop from the 30.5% year-over-year revenue increase for the first nine months of 2020, and the 32.5% year-over-year revenue increase for the full year 2020. The following month, on October 13, 2021, First High-School Education issued a release announcing that its CFO, defendant Lidong Zhu, had resigned as CFO. And on December 16, 2021, First High-School Education announced that it had dismissed its auditor KPMG Huazhen LLP.
On April 5, 2022, First High-School Education announced that it had received a letter from the New York Stock Exchange (“NYSE”) stating that it was in non-compliance with the NYSE’s listing requirements because its total market capitalization and stockholders’ equity had fallen below compliance standards. The following week, on April 13, 2022, First High-School Education announced that its total revenues for 2021 were just RMB400.2 million, representing a substantial deceleration in the second half of the year. The release also stated that First High-School Education’s total student enrollment had remained almost unchanged at 21,247 students at year’s end, representing a paltry 3% increase year-over-year, and that First High-School Education’s gross profit had declined 18.1% during the year.
Finally, on May 3, 2022, First High-School Education filed a notice with the U.S. Securities and Exchange Commission that it would not be able to timely file its annual report on Form NT 20-F.
By May 10, 2022, First High-School Education ADSs closed below $1 per ADS – more than 90% below the price at which First High-School Education ADSs were sold to the investing public a little more than one year previously. At the time of the filing of this complaint, the price of First High-School Education ADSs has remained significantly below the IPO price.
Wolf Haldenstein has extensive experience in the prosecution of securities class actions and derivative litigation in state and federal trial and appellate courts across the country. The firm has attorneys in various practice areas; and offices in New York, Chicago and San Diego. The reputation and expertise of this firm in shareholder and other class litigation has been repeatedly recognized by the courts, which have appointed it to major positions in complex securities multi-district and consolidated litigation.
If you wish to discuss this action or have any questions regarding your rights and interests in this case, please immediately contact Wolf Haldenstein by telephone at (800) 575-0735 or via e-mail at firstname.lastname@example.org
Wolf Haldenstein Adler Freeman & Herz LLP
Patrick Donovan, Esq.
Gregory Stone, Director of Case and Financial Analysis
Tel: (800) 575-0735 or (212) 545-4774
Certification and Authorization Pursuant to Federal Securities Laws
Date of signing: 07/01/2022