"Shark" Thuy's Egroup operated for many years based on financial leverage, mobilizing trillions of dong, but in the end, it continuously owed money to investors, begged employees' salaries, and failed to pay tuition.
Mr. Nguyen Ngoc Thuy - Chairman of the Board of Directors (BOD) of Egroup Education Group Joint Stock Company, has just been arrested on charges of fraudulent appropriation of assets. Previously, many investors accused Mr. Thuy of fraud through the transfer of Egroup shares.
Egroup was founded by "Shark" Thuy in 2008. This group's ecosystem spans many fields from education - training, health care to food. Among them, the most prominent is Apax Holdings (IBC) - behind the Apax Leaders English center chain, the only company listed and designing many large investment deals. The remaining, Egame Company and Ecapital Company are the units through which Egroup raises capital.
Delay in paying interest to investors
Since 2017, Egame and Ecapital have called on investors to approve "strategic cooperation agreements" in exchange for shares of parent company Egroup. According to the agreement, the investor must hold these shares for a period of time (usually one year). On the settlement date, Egroup commits to find a partner or directly buy back at a higher price than when selling, or donate a certain number of additional shares to re-sign the new agreement.
Initially, calculating the difference in share price, investors can earn a profit of 20-25% (2017-2018), then gradually decrease to 17-18% in 2019-2020. By 2021, this interest rate will only be 14-15% a year.
In the period before 2020, Egroup paid full interest. But from the beginning of 2020, "Shark" Thuy's company began to delay paying interest to investors because they were having difficulty doing business because of the Covd-19 epidemic. After that, this business was silent.
Delayed interest payments also happened to bond holders at businesses in the same ecosystem as Mr. Thuy.
When asked, Egroup leaders repeatedly refused to give VnExpress Know the total amount of debt and investors participating in cooperation agreements and bonds. The reason is "we have limited staff so we can't finalize the debt yet".
Mr. Nguyen Ngoc Thuy - Chairman of Egroup, in an online meeting with shareholders and investors, August 8. Screenshots
According to data on the Hanoi Stock Exchange (HNX), Mr. Thuy's ecosystem in the period 2018-2021 issued 6 lots of bonds, more than 1.340 billion VND, with an interest rate of 12-15%.
Unable to repay investors on time, Egroup's leadership asked for another 3-5 years, up to 2028, according to the most optimistic scenario. They also hope to reduce past interest and stop charging new interest until the debt is repaid. For investors who can't wait, Egroup has a write-off plan, including real estate, "franchise" investment packages for English centers, English learning and household appliances.
Missed tuition payment deadlines
Delayed in repaying investors, "Shark" Thuy's company also failed to repay tuition fees at Apax Leaders English centers - the backbone link in Egroup's ecosystem.
Since the end of 2019, the Apax Leaders English center chain has been complained by many parents in Ho Chi Minh City, Hanoi, Dak Lak, and Da Nang, demanding a refund of billions of VND in tuition fees because the quality of teaching is not as promised, "hug money abandoned customers” and stopped operations.
After asking investors for debt forgiveness, Egroup restructured Apax Leaders and announced the completion of the first phase at the end of March 3. At that time, this chain had 2023 centers, mainly in the North.
But the centers that reopened also closed one after another. The board of directors explained that due to low revenue, mainly accepting back old students who had previously paid fees, new sources of money are still limited. As for the centers in Ho Chi Minh City, Mr. Thuy said they encountered "special difficulties" because parents did not agree to let their children continue to study and "besieged" them demanding tuition fees.
After many negotiations, in March last year, the company divided parents into two groups with different repayment schedules. Many group 3 parents have received all their money back, through three installments, lasting from June to August 1. The second group is promised a tuition refund in 6 installments, each installment of 8%, expected from October 2023 to April 5. However, Apax Leaders then did not make the commitment and proposed a new roadmap, lasting until the end of 20.
At the end of 2023, this English center chain announced its insolvency. According to data from the Department of Education and Training of Ho Chi Minh City, Apax owes parents here more than 108 billion VND, has paid 14,2 billion VND, leaving nearly 94 billion VND. This unit proposes a plan to gradually repay the debt from 2025, paying each parent 4,5 million VND every quarter until it runs out.
Today, Apax Leaders announced that refunds to parents had been stopped, after "Shark" Thuy was arrested for allegedly fraudulently appropriating property.
Why did Egroup fall into crisis?
In fact, the Egroup ecosystem is unstable because the companies' operating model depends heavily on financial leverage. With the backbone of Apax Leaders, Egroup relies on capital mobilized from investors to open more education chains and schools, then expand into the fields of health care, cuisine and financial investment.
Before 2019, the Apax Leaders chain continuously opened a new operating network from North to South, with 130 teaching points in its heyday. By the end of 2019, the company behind it, Apax Holdings, had total liabilities of about VND 1.974 billion, 2,1 times greater than equity.
Answer VnExpress At the end of 2022, Mr. Nguyen Ngoc Thuy admitted that the ecosystem was "facing difficulties and disadvantages on many fronts", the biggest being cash flow. At the investor meeting in early August 8, the Chairman of Egroup said that the core cause of the crisis was the business model of "rapid growth with debt".
But many investors have different opinions. They suspect Egroup and Mr. Nguyen Ngoc Thuy of using capital to invest in securities, cryptocurrency, real estate... instead of core business activities.
Regarding this, Mr. Thuy once denied, saying he had never invested in stocks or cryptocurrencies. But on the financial report of subsidiary Apax Holdings in 2022 - the most recent information disclosure, this enterprise has 100 billion VND in securities. This amount is disclosed as shares of subsidiary Ecapital.
Regarding real estate, Apax Holdings once planned to invest 300 billion VND to cooperate in investing in the Hong Quang - Long Hai tourist area (Ba Ria - Vung Tau) in 2022. Previously in 2020, this enterprise also cooperated in building Construction, exploitation and development of Vung Ang multi-purpose housing and service area project (Ha Tinh).
According to Mr. Thuy, this business cooperates to establish an educational infrastructure company, buys inter-level schools, buys land to build experience and resort areas related to education... That is, it is essentially a real estate investment. products serving education.
However, there are consequences of a company growing with financial leverage leaves kInability to repay investors, missed tuition refund deadlines. Egroup has also been begging for wages and social insurance for workers for the past 5 years. Many employees chose to quit, including many foreign teachers.
According to data from Hanoi Social Insurance, by the end of February, Apax Leaders owed more than 2 billion VND in social, health and accident insurance for domestic and foreign workers. Overall, the ecosystem including CMS, Igarten, Egroup, Egame and English Now owes nearly 62,5 billion VND to insurance.
In previous investor meetings, Apax Leaders leaders repeatedly promised to refund income and salaries owed to employees. They also promised to have a stock bonus policy for employees to "compensate" after a successful restructuring. But up to now, many employees, including those who have quit, said they have not received their salaries, their insurance is still owed and they do not know when they will be reimbursed.
Mr. Pham The (Hanoi) and three family members poured more than 3 billion VND into Egroup through many different strategic cooperation agreements since 2017. When "Shark" Thuy's company stopped paying interest from the beginning of 2020 Up to now, his family has lost about 40% of their monthly income. But according to him, many people are even more miserable because they mortgaged their houses, assets or borrowed money from banks to "smash" their investments at Egroup. Because at that time, the interest rate this company offered was 5-7% per year different from deposits at banks. These cases are currently facing a "dilemma" when their debt is tightened by the bank.
"Now I just hope that the authorities will help the family get back the original investment, and don't care about the interest anymore," Mr. The expressed his wish after hearing about Mr. Thuy's arrest.
Siddhartha
