New Oriental "franchise" three suspects

In the murky waters of new Oriental's questioning, the first is the accusation that it conceals the truth of franchising. As a result, muddy Waters called the new Oriental fraud and what they saw as "most of the Chinese frauds", the fact that investors were told that there was a very large gap between the operational facts and the truth, since franchising and owning a business were two distinct business models. The point was later denied by the New Oriental CEO, Yu Yu, and said that the new Oriental is "acne", but not "cancer." However, the tiger sniff shallow research, think: muddy water to this question point is not completely not set up. Let's go one by one. Maybe you can't say that Shedong is lying. The dialogue with the new Oriental CFO, Xie Dong, posted by the muddy Water Company (MW) is as follows: Save to photo album as a basis, muddy water accuses Shedong of lying on franchise, that is, to conceal the existence of the franchise, to his claim that all 650 stores are straight shop. Strictly speaking, Xie Dong's answer is not a lie. The context of this dialogue is misplaced, and MW wants to know whether all branches of the new Oriental business are owned by the new Oriental and have no form of external cooperation. The context of Xie Dong is the new Oriental financial statements covered by 650 of the "New Oriental" brand of teaching centers and schools, are wholly owned by the new Oriental. And that's why, in the face of the questioning of Muddy Waters, Mr Yu can justly respond to say: At present, the new Oriental brand of schools, all of the new Oriental Direct camp; In addition, the new Oriental brand bubble children's education in the country authorized 19 schools, the stars of the brand authorized 2 to join the school. These 21 joined schools, all only authorized the use of bubble children and stars brand, rather than authorize the use of new Oriental brand. In addition to the cost of joining, these affiliated schools own operating income has never been reflected in the new Oriental consolidated financial statements. In addition, the number of new Oriental schools, the number of teaching centers and the number of enrolled students in the new Oriental comprehensive earnings report are not included in the 21 schools. The official statement of New Oriental, more precisely, admits that these franchises began in the 2010 fiscal year, but no more than 21, and never counted on the scale of the new Oriental reports: At the beginning of fiscal year 2010, New Oriental began experimenting with small pilot projects to allow third-party agencies in some small cities to provide "Children's Bubble English Project" and "New Oriental Star" (Oriental) Kindergarten English teaching program, but these pilot projects did not have a substantial impact on the new Oriental Company. More importantly, the new Oriental has never counted the cooperative facilities of these projects into its own teaching centers and schools, which have never been more than 21, and the new Oriental has not incorporated the number of students in their own schools and teaching centers. However, the new Oriental and Mr Yu's responses still do not answer the following questions. Doubt 1: In the new Oriental Annual report, why not disclose "bubble children" licensed to operate the behavior? New Oriental Selfsaid that from the beginning of 2010 to try to bubble children's English and stars two brands to attract franchisees, but in the 2011 Annual report as of May 31, 2011, but did not mention this matter to investors. But repeatedly emphasized the subordinate organization "pure self". In the P31 of the 2011 Annual report, New Oriental wrote: We provide educational programs, services and products to trainees through our own 54 schools, 433 teaching centers and 28 bookstores, as well as 47 teachers in more than 5,000 Third-party bookstore and 11,700 cities, Our online school also has 6.7 million registered users ... All our schools, teaching centers and bookstores are operated under the "New Oriental" brand ... In the annual report on the bubble children's business, the new Oriental also did not disclose the business authorized business behavior. These statements give people the illusion is: the new Oriental listing business, has never authorized to join the store, are all self-employed. But this statement does not conform to the facts. As mentioned above, Mr Yu, under the muddy water attack, admits that "bubble children have authorization behavior". "Do not mention" means opaque, is a taboo in the capital market. Of course, a listed company in theory can not be in every aspect of each pore to be disclosed, but also theoretically, through licensing licensing operations to achieve (partial) business expansion, shareholders should be aware of the company's new changes, because it means that the brand has been diluted or improper operation of the risk ( Even if the output of the brand does not include "new Oriental" three words to the new Oriental company is also risky, because "bubble children" is also the new Oriental brand. New Oriental has been listed on the NYSE since 2006, and is already a capital veteran in the stock market. Why risk hiding the secret? Tiger Sniff guess, this is new Oriental deliberately for it. or the new Oriental internal licensing operation This means do not think well, so do not want to highlight this, or do not want to let investors to "new Oriental" This brand is likely to cause concern. Mr Yu himself is the one who has the brunt of this risk. "Business Review 21st Century" in June 2011 reported that Mr Yu felt pressured: if the "Shepherd-style" management model, the quality of teaching can not be unified control, will erode the brand of new Oriental, creating a huge brand risk. So, did not disclose this part to join "bubble children", become muddy water seize the new Oriental "pain point." (In the American investor logic: You are not honest at all, the integrity of the entire company is questionable) (Source: Tiger sniffing net)