In a recent filing with the Shenzhen Stock Exchange Beijing Kaiwen Dexin Education Technology Co., Ltd. (“Kaiwen Education/The Company”) was required to provide supplemental information about its purchase of Westminster Choir College.
As part of the inquiry the company was asked to elaborate on “the pricing basis and rationality” of the transaction “in combination with the main assets of the subject, asset evaluation report and` the adjustment of the transaction price…in the agreement.”
In response Kaiwen Education made clear its intentions: “The scope of the acquisition subject includes all tangible assets, intangible assets, real estate, and used or available rights of the Westminster Choir College, Westminster Conservatory of Music, and Westminster Continuing Education, including but not limited to school premises; teaching equipment and facilities; licenses, agreements and other instruments related to such schools; all the courses; receivables; operational information and records; intellectual property, etc., as well as the donated funds to be transferred to Westminster Choir College and all the newly added donations received before the delivery date.”
The Kaiwen filing reveals that the endowment of Westminster Choir College, a non-profit corporation with tax deductible status, along with the campus and all college assets would become the property of a for-profit company. According to the federal tax code not-for-profit corporations must not be organized or operated for the benefit of private interests. But if this sale is consummated those assets will now benefit the for-profit corporation and its shareholders and that, we believe, is in clear violation of state and federal law.
All of these donations were made with the express and specific understanding that they were to a not-for-profit 501(c)(3) institution organized under New Jersey and federal charitable laws, their transfer to a for-profit commercial enterprise violates those regulations and the express wishes of the donors. This sale constitutes a raid on those assets and should be investigated by the appropriate governmental agencies.
In the meantime, Kaiwen Education continues to put up disturbingly poor economic numbers as revealed in its 2018 semi-annual report (August 7), which covers the first six months of this year. During this period Kaiwen reports a net loss of 51.7 million yuan on revenues of 89.4 million yuan, a loss of 57.8 percent, which follows a first quarter 2018 net loss of 74.3 percent. Looking ahead the company projects a net loss of from 65 to 75 million yuan for the period January – September 2018.
Kaiwen’s continuing pattern of net losses and very low cash to short-term debt raises serious concern about its ability to sustain itself over even the midterm and is another example of a reality that is very different than the one being promoted by the Rider administration.
Halpern is president of the Rider chapter of the American Association of University Professors.