Yu Minhong (Michael Yu), the founder and CEO of New Oriental Education & Technology Group Inc. [File photo]

Yu Minhong (Michael Yu), the founder and CEO of New Oriental Education & Technology Group Inc, responded to the change of Variable Interest Entity (VIE) and the doubt caused by Muddy Waters Research.

"New Oriental is actively collaborating with the probe of the U.S. Securities and Exchange Commission (SEC) and believes that SEC will produce a fair result," He also denied all doubtful points proposed by the Muddy Waters Research.

Due to the double strikes of VIE adjustment and the Muddy Waters' shorting report, the shares of New Oriental fell 70 percent and led to the fell of other China concepts stocks.

Yu objected to the four doubtful points raised by Muddy Waters Research at the yesterday's press conference. In terms of franchisee, he said that all schools that had the title "New Oriental" are directly operated by New Oriental. In addition, its sub-brands Pop Kids Education and Stars have respectively 19 and 2 franchisee schools. However, these 21 schools can only use the brands of Pop Kids Education and Stars, not New Oriental. In addition, the operation revenue of these schools didn't include the comprehensive financial statements of New Oriental, except their up-front franchise fee. Furthermore, the school and teaching center numbers and the number of students published in the financial statement didn't include these 21 schools.

As for the issue of paying tax, Yu stressed that New Oriental has always been paying taxes in compliance with the law. "New Oriental has been a large taxpayer over the years and paid various kinds of taxes according to the law."

As for the survey about VIE, Yu said they will cooperate with the SEC. The investigation will take about two months to six months. Stock buy-back can't take place during the survey. He also said that VIE structure change didn't have any impact on the shareholders of listed companies. In addition, he said that New Oriental won't delist.

Xie Dongying, CFO of New Oriental said: "As it is a sensitive time for the company, I can't speak too much about the progress of the survey. However, the VIE structure change is open and we only clear away the old VIE shareholders who aren't related to the operation." Unitl now, 10 VIE shareholders have left.

A VIE expert said that New Oriental's VIE structure change is totally different from Alibaba's case, so it shouldn't be considered as a rerun of the Alibaba case.

"The stock equity simplified of its domestic operating body didn't affect the VIE structure of the offshore companies and New Oriental. The interests of the offshore companies and their shareholders won't be damaged. So, it is essentially different from the case of Alipay cancelled VIE structure," Huang Song, the Secretary-General of Finance and Industry Development Research Center of Peking University said.