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First High-School Education Group Co., Ltd.


The law firm of Kirby McInerney LLP announces that a class action lawsuit has been filed in the U.S. District Court for the Southern District of New York on behalf of those who acquired First High-School Education Group Co., Ltd. (“First High-School Education” or the “Company”) (NYSE: FHS) American Depositary Shares (“ADSs”) pursuant and/or traceable to the Company’s March 2021 initial public offering (the “IPO”). Investors have until July 11, 2022 to apply to the Court to be appointed as lead plaintiff in the lawsuit. 
 
First High-School Education operates private high schools in Western China and provides for-profit tutoring services.
 
On March 11, 2021, First High-School Education conducted its IPO and the Company sold 7.5 million shares for $10.00 per share.
 
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. On this news, First High-School Education’s ADS price declined by $0.05 per ADS, or approximately 0.78%, from $6.37 per ADS to close at $6.32 per ADS on May 12, 2021.
 
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 slow . . . until they obtain more clarity on how the changes will be implemented.” On this news, First High-School Education’s ADS price declined by $0.16 per ADS, or approximately 2.57%, from $6.22 per ADS to close at $6.06 per ADS on May 17, 2021.
 
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. On this news, First High-School Education’s ADS price declined by $1.27 per ADS, or approximately 20.16%, from $6.30 per ADS to close at $5.03 per ADS on July 23, 2021.
 
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 Chief Financial Officer (“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 this news, First High-School Education’s ADS price declined by $0.89 per ADS, or approximately 22.88%, from $3.89 per ADS to close at $3.00 per ADS on September 28, 2021.
 
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. On this news, First High-School Education’s ADS price declined by $0.05 per ADS, or approximately 3.21%, from $1.56 per ADS to close at $1.51 per ADS on April 5, 2022.
 
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. On this news, First High-School Education’s ADS price declined by $0.04 per ADS, or approximately 0.46%, from $1.09 per ADS to close at $1.05 per ADS on May 3, 2022.
 
On May 11, 2022, First High-School Education ADS closed at $0.89 per ADS.
 
The lawsuit alleges throughout the Class Period, the IPO’s Registration Statement made false and/or misleading statements and/or failed to disclose that (i) 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; (ii) 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 (iii) 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.
 

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