As of the close of the US stock market on September 25, Huaxia Boya has 29 trading days with a share price below $1, and the current share price of $0.3, as well as the market value of $9.48 million, is expected to be difficult to return to the compliance line in the short term.
By Nasdaq standards, Huaxia Boyalife may once again be on the verge of delisting.
The last time that happened was last year, and then Huaxia Boyah became the shell company of Aichi Automobile. Less than a year, why did Huaxia Boya return to the origin?
The turbulent road to backdoor
On July 19, 2022, Huaxia Boyalife announced that it had received a delisting warning letter from NASDAQ, reminding it that its share price no longer met the minimum bid price requirement for continued listing on Nasdaq. According to the announcement at the time, Huaxia Boyah needs to regain compliance before January 11, 2023. This is just over two years after it went public.
For listed companies in education, there are many ways to comply, such as buying back shares, and pulling up stock prices, etc., while Huaxia Boyah chose to sell shells.
On November 3, 2022, Huaxia Boyar announced that the company signed a merger agreement - new energy vehicle brand Aichi Automobile will be merged with the company's wholly-owned subsidiary. After the merger, Aichi Auto shareholders and Huaxia Boyah shareholders will hold 99.2 percent and 0.8 percent of the shares, respectively, after the completion of the merger, Aichi is valued at $5 billion to $6 billion. At the time, the transaction was expected to close on or before December 31, 2022.
But that plan has gone awry. In 2022, Aichi Automobile was exposed to a cash turnover problem. The founder team represented by Fu Qiang gradually withdrew from Aichi Automobile, and Chen Xuanlin took over. At the end of 2022, Chen Xuanlin resigned as chairman of the board, the chairman of the board was replaced by Zhang Yang, and the CEO of Aichi Automobile was changed to Qiu Xiaochuan. During this period, Aichi Automobile has a series of problems such as salary arrears, supplier payment difficulties, office space rent, property fees, and unpaid utilities, and the process of backdoor listing has failed to advance according to the plan.
In May this year, the situation of Aichi automobile has not improved, and Huaxia Boyah issued an announcement to terminate the merger plan with Aichi.
After announcing the end of the plan, Huaxia Boyalife's shares fell 21 per cent in a single day and were once again trading below $1 for a long time. In June and July this year, the share price of Huaxia Boyah rose 1.5 times, but then the share price plunged 69 per cent on August 14, and then plunged 44 per cent the next day, hitting bottom.
Aside from the impact of the backdoor failure, in fact, Huaxia Boya has been very "struggling" from the beginning of its listing.
Hard road to market, the first year to change the boss
Data show that Huaxia Boyah was established in Beijing in August 2011, the initial business is mainly divided into five parts: Sino-foreign cooperation in school business, development and provision of Sino-foreign cooperation curriculum textbooks and teaching materials, overseas study consulting services, smart campus solutions technical consulting services and pre-service training. On May 8, 2020, it was successfully listed on NASDAQ.
However, the listing prospectus shows that in the ninth year of its establishment, Huaxia Boyah's revenue in the 2019 fiscal year was only 5.256 million US dollars, or about 37.137 million yuan. Even from such a small base, the annual growth rate is only 9.29%.
Due to the low base superimposed slow growth rate, Huaxia Boya broke on the first day of listing. The offering price was $6, the shares opened at $5 and closed at $4.90.
After more than two months on the market, Huaxia Boya suddenly changed. The company said in a statement that former CEO Jianxin Zhang resigned as a director, chairman and chief executive officer of the company and was replaced by Lam Ngai Ngai.
In its first annual report after going public, its revenue for fiscal 2020 was $5.02 million, down 4.4% from the previous year. For a newly listed company, changing managers in the first year of listing and declining revenue is not a positive signal. And this is the key reason why its share price has been sliding.
Huaxia Boyah is not without rescue. In February 2022, the Group announced that it had entered into a subscription agreement with Lin Yiyi, Chairman and Chief Executive Officer of Huaxia Boyar, for a private placement of 2 million ordinary shares at a price of $1.50 per share, for a total subscription price of $3 million. In April, it reannounced that it had entered into a subscription agreement with certain qualified investors to issue and sell 6 million shares of its common stock for an aggregate price of $9 million.
In July, it acquired 100% of the equity of Oriental Intelligence for the consideration of 7 million ordinary shares. The latter was originally owned by Beijing Cloud Class Technology Co., LTD., which is a comprehensive service provider of higher vocational education.
However, after a series of fixed additions and mergers and acquisitions, the performance of Huaxia Boyah is still struggling. For the whole year of 2022, its revenue was $1,603,300, an increase of 196.8%, but there was a net loss of $1,689,000, an increase of 35.13%, and it has been a loss for two consecutive years.
In the continuous transformation process, Huaxia Boya has always been in a state of struggle, performance is difficult to improve, and finally failed to change the trend of declining stock prices. Now, the backdoor failure of Huaxia Boya, can reverse the situation?
'Snake swallows elephant'
From the financial report of 2022, the main changes in Huaxia Boyah's business are currently concentrated in course fee income.
In 2022, among a series of fixed additions and mergers and acquisitions, its acquisition of 100% of Wanwang Investment is the most noteworthy. According to the agreement at that time, Huaxia Boyalife acquired 100 percent of Wanwang Investment for $60 million. It is reported that Wanwang invested in the operation of an independent junior college and an undergraduate secondary college, the number of students more than 4,200.
It is worth noting that at the time of the announcement, the total market value of the entire Huaxia Boya was about 15.3 million US dollars, far below the purchase price of 60 million US dollars, which is called "snake swallowing elephant". The acquisition was completed in September of the same year. This part of the business will become an absolute revenue main force in 2022. The annual revenue contribution reached $63.855 million, accounting for 55%.
Sino-foreign cooperation in running schools is also rising. In 2022, it increased from $2.676 million to $3.343 million, an increase of 24.9%. It accounts for nearly 30% of total revenue. This increase in revenue was mainly due to a change in the mix of students in different academic programs, with average tuition fees increasing by 24.9%.
As a result of the acquisition of Oriental Intelligence, this revenue was also incorporated into the pre-employment training business. The business contributed $1.2 million in 2022, an increase of 8.18 times, and its share jumped to 10.9%.
Overseas study consulting services increased 7.77 times year-on-year, mainly due to the fulfillment of service contract obligations with Beijing Foreign Studies University, but this business has been discontinued in January this year. In addition, smart campus solutions technology consulting services revenue fell 73.6% year-on-year.
It can be said that at present, the merger and acquisition of Wanwang Investment and Oriental Intelligence is the core element of Huaxia Boyah's business scale expansion. However, what needs to be seen is that the information released in the financial report shows that the two colleges of Wanwang Investment have enrolled 4,967 students. From September 2022 to June 2023, the average tuition fee per student is 2,794 US dollars, equivalent to 20,000 yuan. The number of students is still limited, and the pressure for further expansion is still not small.
After the failure to sell the shell to cash out, Huaxia Boya returned to the same place, and the continued downturn in the stock price once again put the qualifications of the listed company at risk. Although after a series of mergers and acquisitions, the revenue scale has finally expanded from the million dollar level to the tens of millions of dollars level, but in the short term, it still needs extraordinary means to temporarily change the situation, and in the long term, Huaxia Boya needs greater actions to change the scale problem.