(Yicai Global) Sept. 14 -- Shares of New Oriental Education & Technology Group fell after the Chinese education technology company reportedly closed its kindergarten-to-grade 12 business unit, DFUB.

After dropping as much as 5.4 percent in Hong Kong earlier today, New Oriental [HKG: 9901] ended 4.6 percent down at HKD15.32 (USD1.97), while its subsidiary New Oriental Online [HKG: 1797] fell 3 percent to HKD4.61.

With China’s government moving to ease the workload on students, New Oriental has decided to close DFUB, Beijing News reported yesterday, citing a company insider. The report also said that the Beijing-based firm had sufficient funds on paper and will refund DFUB’s students and compensate staff.

DFUB must have enough funds to compensate all of its employees based on China’s N+1 redundancy pay formula, according to the Southern Metropolis Daily. With N+1 a firm must pay compensation of one-month salary per year worked plus an extra month’s salary.

New Oriental’s New York-listed stock [NYSE: EDU] was also down almost 1 percent at USD2.09 in pre-market trading as of 7.34 a.m. local time today, after having dipped 0.5 percent yesterday.

Zhu Yu, chief executive of DFUB and vice president of New Oriental Online, said he plans to work as volunteer teacher in remote and poor areas of China for one to two years and continue to contribute to the cause of education and public welfare, the Beijing News said.

New Oriental set up DFUB in 2016. As a so-called K-12 business, DFUB focuses on interactive live-streaming courses based on teacher resources in Beijing and targets students in third-, fourth- and fifth-tier cities using the internet.

As of May 31, the number of DFUB’s paying students was double what it was a year ago, with the business entering 273 Chinese cities in 27 provinces, according to New Oriental’s 2021 financial report.

In July, the General Office of the State Council, China’s cabinet, issued guidelines in order to reduce the burden of homework and off-campus learning on students in the compulsory education stage.

The guidelines state that school subject training institutions will not be allowed to go public or raise funds. After-school tutoring centers must not open on national holidays, rest days as well as winter and summer vacations for subject training. And all online training for preschoolers is prohibited.

Editor: Peter Thomas