On the evening of July 27, Hong Kong-listed vocational education leader FENBI (02469.HK) released its interim profit warning for 2026, a sharp reversal from profit to loss that immediately ignited negative sentiment in the secondary market. On the first trading day following the announcement, July 28, FENBI's stock price plummeted 16.87% to close at HK$0.345, leaving its total market capitalization at just HK$773 million. As of July 29, the company's shares have dropped a staggering 84.15% year-to-date. The former "top public exam stock," once valued at over HK$30 billion, has now seen over 90% of its market value evaporate.
On one side, the company's core business revenue is shrinking and has turned from profit to loss; on the other, a public relations storm erupted from former CEO Zhang Xiaolong's controversial speech at Renmin University. Compounding these issues, the company's securities investments have incurred significant unrealized losses. These multiple pressures have converged, placing this once-thriving training leader at a critical crossroads. Ironically, just two months ago, the company's founder was publicly touting the "myth" of getting rich through stock trading, only for the company's own securities investments to deliver massive losses.
Industry Downturn and Layoff Costs Lead to H1 Loss of Up to 200 Million
According to the profit warning, for the first half of 2026, FENBI expects to achieve revenue of no less than 12.2 billion yuan, representing a decline of up to 18.3% compared to the 14.92 billion yuan reported in the same period of 2025. On the profit side, a reversal is evident, with an expected net loss of no more than 200 million yuan for the period, in stark contrast to the 226.7 million yuan profit recorded a year earlier. On an adjusted basis, the company also swung from a net profit of 271.5 million yuan to a loss of up to 180 million yuan.
Looking at the core reasons disclosed in the performance warning, a cyclical downturn in the industry is the fundamental cause of FENBI's revenue contraction. The announcement clearly states that the decline in revenue is rooted in two major industry variables: first, the number of job openings in national and civil service exams continues to shrink, leading to a persistent narrowing of market growth space; second, competition in the public exam training sector has become fiercely intense, with small and medium-sized institutions luring students through low-price strategies, putting continuous pressure on pricing and per-customer profit for leading companies. Data shows that while over 3.71 million people applied for the 2026 national public exam, creating a high competition ratio of 98:1, the number of available positions has simultaneously decreased, forming a distorted pattern of "soaring applicants, fewer jobs."
The combination of shrinking market demand and price wars eroding gross margins has directly impacted FENBI's two core businesses—online training and book sales—causing revenue to decline year-on-year for two consecutive half-year periods. The swing from profit to loss also incorporates the periodic cost pressures from the company's proactive cost-cutting measures. In its announcement, FENBI acknowledged that in response to the long-term downward industry trend, the group initiated a large-scale organizational restructuring and substantially reduced its workforce, incurring significant employee severance costs that further amplified the current period's losses.
Founder Promotes Getting Rich via Stocks, But Company Investments Lose $8.3 Million
Beyond the operational losses, the company's substantial losses from securities investments have also drawn market attention, creating a stark and ironic contrast with the public comments made by founder Zhang Xiaolong just one month earlier. The announcement reveals that between July 1 and 7, FENBI disposed of its holdings in ETFs and listed securities, incurring a total investment loss of $8.3 million. As of July 24, the company still held shares in three listed companies, with a combined fair value of $8.5 million. Given global stock market volatility, there is ongoing risk of further impairment to these financial assets, which could further pressure the company's cash flow.
On June 3, Zhang Xiaolong, then still Chairman of the Board and CEO of the company, was invited to give a career planning lecture at the School of Philosophy, Renmin University of China. The lecture was originally planned to focus on the public exam industry but was changed at the last minute. Instead, he spent the entire time promoting the idea of getting rich through stock trading, claiming he had invested 80 million yuan and made a profit of 53 million yuan in just one month. He boldly stated that trading U.S. stocks and tech stocks was the best career path for young people and even advised students to abandon their pursuit of public exams and start trading stocks.
This sharp contrast—between the company founder publicly creating a "stock god" persona and promoting overnight wealth through stock trading, and the company's own disastrous securities investment performance—has stunned the market. While it is common practice for listed companies to use idle cash for financial management, FENBI, facing a decline in its core business and needing continuous investment, chose to funnel significant capital into the high-risk secondary market. The resulting large losses essentially reflect management's lack of confidence in the core business and imprudent investment decisions. The founder's own excessive promotion of stock trading inevitably leads investors to question whether the company's strategic focus has strayed from its main operations.
Renmin University Speech Triggers Trust Crisis, Stock Price Plunges Nearly 40% in a Month
The public opinion storm ignited by this speech has severely damaged FENBI's brand reputation and directly impacted its secondary market performance. Market data shows that on the trading day before the speech (June 2), FENBI's closing price was HK$0.70, with a total market cap of HK$1.567 billion. On the day of the speech, June 3, the stock price tumbled 4.29% to close at HK$0.67, erasing over HK$60 million in market value in a single day. The controversial topic quickly trended on social media, and the founder's disparaging remarks about the public exam career path sparked widespread backlash. A large number of exam preparation students and paying customers demanded refunds and boycotted FENBI courses on social platforms, significantly impacting online and offline order conversion.
The capital market simultaneously voted with its feet. In the month following the speech, the stock price continued to weaken, hitting an all-time low of HK$0.40 on June 26. From June 3 to 30, within less than a month, the cumulative stock price decline reached 39.55%, with nearly HK$600 million in market value wiped out. Market participants generally believe the founder's value orientation was severely misaligned with the core public exam training business, leading to doubts about the company's long-term operational stability and causing sustained selling of shares. In the early stages of the public opinion crisis, FENBI quickly issued two apology letters, but they failed to restore public goodwill. The nearly month-long controversy ultimately concluded with a change in management. On July 8, FENBI announced that Zhang Xiaolong had resigned from all management positions, including Executive Director, CEO, and Chairman. The group's operations were fully taken over by Vice President Sheng Haiyan. The market widely regards the brand and investor trust crisis triggered by the Renmin University speech as the core catalyst for his resignation.
Difficult Transformation During Industry Winter, Commercialization Questions Remain Unanswered
The predicament faced by FENBI is not an isolated case. The domestic public exam training sector is currently undergoing a structural adjustment: shrinking recruitment quotas, intensifying low-price competition, and declining willingness among students to pay. The era of rapid expansion through online traffic, which once fueled growth, is fading. A large number of students are shifting towards free short video resources and public problem-solving apps, while sales of high-priced systematic and contractual courses continue to decline. The industry as a whole has entered an era of internal competition over a stagnant market. Compared to the ongoing losses and store closures of competitors like Zhonggong Education, FENBI, despite maintaining a lighter offline cost structure through its online model, still finds it difficult to counter the overall trend of shrinking industry demand.
To reverse its decline, FENBI is, on one hand, optimizing its cost structure through layoffs to alleviate profit pressure. On the other hand, it is increasing investment in AI tool development, hoping to find a second growth curve by leveraging smart question banks, AI grading, and mock interview products, thereby reducing its reliance on the single public exam sector. However, in the short term, the AI business has not yet generated meaningful revenue and cannot offset the revenue gap caused by the decline of its core business. Coupled with the brand reputation damage from the earlier management turmoil, the business recovery cycle has been significantly lengthened.
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