Sunlands (STG) effects change in ADS ratio, stock flies. Know more

Highlights

  • Sunlands Technology Group (NYSE: STG) has changed its ADS ratio to class A ordinary shares effective from Tuesday.

  • The shareholders will not be impacted by the decision.

  • The stock jumped 7.34% at 9:36 am ET after the announcement. 

China’s Sunlands Technology Group (NYSE: STG) on Tuesday changed its American depositary share (ADS) ratio to Class A ordinary shares. The stock jumped more than 7% after the change.

On Aug 20, the company had announced receiving a non-compliance letter from NYSE over its ADS trading price, which was below the exchange’s compliance standard. In the letter, the NYSE gave Sunlands six months to meet the minimum price requirement starting July 23.

After that notification, the listed companies get six months (the cure period) to correct the stock price, failing which the companies may face delisting from the exchange.

Considering this, STG changed the ADS to ordinary share ratio from 25 ADS, representing 1 Class A ordinary share, to 2 ADS, representing 1 Class A ordinary share. However, this change will not affect the company’s Class A ordinary shares.

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As per NYSE’s rule 802.01C, the stock should not be less than US$1.00 in 30 consecutive trading sessions. The rule stipulates that the closing stock price on the last day of trading of a given month in the cure period should be at least US$1.00. In addition, the average trading price for 30 consecutive sessions ending the month’s last trading day should be US$1.00 or more.

The STG stock was trading at US$6.98, an increase of 7.34% at 9:36 am ET.

The Beijing-based company offers educational services like post-secondary and professional courses through its online platform. Sunlands’ market capitalization is US$7.0 million. 

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Source – pixabay

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The effect is like a reverse stock split in which 25 ADS would become 2 ADS. And consequently, the stock price would increase in the depository’s book. Sunlands had planned the change from Aug 31, 2021.

The Chinese education technology company had declared the Q2 results on Aug 18. Its revenue for the June quarter was US$97.5 million, and the net income was US$3.4 million. According to the company, SGT’s new student enrollments rose by 4.8% YoY to 86,602 during the period.

The stock has been falling since Aug 20, when it was a paltry US$0.6. The stock started to gain pace from Aug 27, closing at US$0.5202 on Monday. The trading volume was 455,340.

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Bottomline


The price compliance will save the company from delisting from NYSE. Many technology companies have borne the brunt of Chinese regulators in recent times due to new rules. However, analysts expect the new rules may have little impact on Sunlands’ overall performance. Still, investors must carefully evaluate the stocks before investing.

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