RYB shares plunge nearly 40 percent in early New York trade

BEIJING/SHANGHAI - Chinese police are investigating claims of sexual molestation and needlemarks on children at a Beijing kindergarten run by RYB Education Inc, the latest case in a booming childcare industry to spark outrage among parents, sending the company's New York-listed shares tumbling on Friday.

The official Xinhua news agency said late on Thursday that police were checking allegations that some teachers and staff at the kindergarten had abused children, who were "reportedly sexually molested, pierced by needles and given unidentified pills".

Shares in RYB plunged 38 percent on the New York Stock Exchange early on Friday, almost wiping out most of the 44 percent rise in the Chinese company's stock since its IPO in September.

Parents said their children, some as young as three, relayed troubling accounts of a naked adult male conducting purported "medical check-ups" on students, who were also unclothed, other media said.

Some parents, who gathered outside the school to demand answers on Thursday, said their children gave matching accounts of being fed unidentified tablets and of punishments where students were "made to stand" naked in class, media said.

The welfare of children in professional care has become a hot-button issue in China, where a string of high-profile cases of abuse has underlined lax regulations and supervision in the childcare and early learning industry.

"We deeply apologise for the serious anxiety this matter has brought to parents and society," RYB said in a statement on its official microblog on Friday, adding that it was helping authorities.

"We are currently working with the police to provide relevant surveillance materials and equipment; the teachers in question have been suspended and we are co-operating with the police investigation," it said.

SPECIAL INVESTIGATION

The school's principal had lodged a police report against "individuals who have engaged in false accusations and framing", it said, without elaborating.

Beijing police did not immediately respond to a faxed request for comment.

In a statement before its shares opened trade on Friday, RYB said it was planning a $50 million share buy-back programme and had established a special task force led by independent company directors to do a "thorough self-inspection across all teaching facilities".

China's education ministry has begun a special investigation into the operation of kindergartens, it said in a statement on Thursday, and told education departments nationwide to "take warning from these types of incidents".

Separate incidents in China of children being slapped, beaten with a stick and having their mouths sealed shut with duct tape have also gone viral and fuelled anger online.

News of the investigation into the Beijing kindergarten triggered a wave of outrage on social media, with more than 76 million mentions of "RYB" on Tencent Holdings Ltd's WeChat messaging service on Thursday.

"These may be individual cases but the deeper problems they reflect cannot be overlooked," a Xinhua editorial said. "Laws must be enforced, supervision strengthened, teacher wages increased. The childcare industry cannot be allowed to grow in an uncivilised fashion."

HOT SECTOR

Chinese education providers have been attracting major investment, while others have sought global listings, latching onto fast-growing demand from parents for high-end education services.

Before Friday, shares in RYB had been up about 44 percent since a September New York listing, giving it a market value of nearly $766 million.

This was not the first case of alleged abuse at an RYB school.

In 2015, a court in Jilin province found two teachers guilty of physically abusing children at one of its kindergartens in the city of Siping. In that case, staff at the school on "multiple occasions used needles and intimidation tactics to abuse many of the children under their care", according to the court ruling document.

Earlier this year, RYB said it had found "serious mistakes" at another one of its Beijing schools and had asked the principal to step down after videos emerged showing teachers hitting and pushing children.

State television broadcast images of police and angry parents gathered outside the school in Beijing on Thursday, calling for answers.

On Friday, one father leaving the school said he had been there to cancel his son's enrolment and demand a refund.

Another parent, 36-year-old Wang Siqi, said she took the day off work to demand answers, even though her six-year-old son does not attend the school.

"As a mother when I saw this news I really couldn't take it," she said. "This is unforgivable."

RYB says on its website it runs a network of more than 1,300 directly owned and franchised play-and-learn centres and nearly 500 kindergartens for children up to age six in about 300 Chinese cities and towns.