UPDATE: China's Global Education Closes Up 16% Post-IPO

Foreign-language training specialist Global Education and Technology Group Ltd. (GEDU) wrapped up another week of U.S. initial public offerings of Chinese companies with double-digit percentage gains Friday.

The company's stock closed at $12.20 a share on the Nasdaq, up 16.2% from its initial public offering price of $10.50. The company sold 6.4 million American Depositary shares at the high end of its expected range of $8.50 to $10.50.

Global Education focuses on foreign-language training and test preparation in China, and claims to be the leading test-prep company in China for the International English Language Testing System, or IELTS, with the largest market share in terms of revenue and student enrollments in 2009.

IELTS has become the most widely taken test of English-language proficiency for Chinese studying abroad. IELTS scores are used in the United Kingdom, Australia and New Zealand, and increasingly in the U.S., which historically has relied on the Test of English as a Foreign Language, or TOEFL.

Global Education is capitalizing on the increasing interest among Chinese students to study abroad, and the need to demonstrate proficiency in a foreign language, especially English. The number of IELTS test takers in China has increased to about 320,000 in 2009 from about 90,000 in 2005, and Global Education has expanded its network of centers since opening its first in Beijing in 2001. It now has 292 owned and franchised learning centers focused on the IELTS, 144 devoted to helping children learn English, and 30 that specialize in science, non-English languages or after-school tutoring.

The company has started online training and test-prep courses, with more than one million registered members as of June 30.

Total net revenue increased at the company throughout the economic downturn. Net income grew in 2008 and 2009, but was down 26% in the first half of 2010 compared to the same period of 2009. The decline in profits stemmed from foreign-exchange losses, and a change in fair value related to an acquisition.

Global Education faces a lot of competition in its space, including from New Oriental Education and Technology Group Inc. (EDU), which went public in the U.S. in 2006.

Credit Suisse Group (CS) and Bank of America-Merrill Lynch (BAC) managed Global Education's offering.

Also trading for the first time Friday were shares from Ellington Financial LLC (EFC), a specialty-finance company that invests in mortgage-backed securities.

The stock closed at $21.75 on the New York Stock Exchange, down 3.3% from its IPO price of $22.50. The company sold 4.5 million shares at the lower end of its expected range of $22 to $24, which was set by underwriters Deutsche Bank AG (DB) and Cantor Fitzgerald.

Connecticut-based Ellington Financial was formed in 2007 and specializes in acquiring and managing mortgage-related assets, such as residential mortgage-backed securities.

As of June 30, 2010, Ellington held residential mortgage-backed securities with a net value of about $157.2 million, derivatives contracts with a net value of $128.1 million, and had total shareholders' equity of approximately $294.4 million. Its net increase in shareholders' equity from operations for the six months ended June 30, 2010, and 2009 was $11.3 million and $50.4 million, respectively. The majority of the period-over-period decline was due primarily to a reduction in net realized and unrealized gains related to mortgage securities it held that aren't backed by government-sponsored agencies such as Fannie Mae (FNMA) and Freddie Mac (FMCC).

-By Lynn Cowan, Dow Jones Newswires; 301-270-0323; lynn.cowan@dowjones.com

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