TCTM Announces US$2.0 million Private Placement of Class A Ordinary Shares

Rhea-AI Summary

TCTM Kids IT Education Inc. (NASDAQ: TCTM), a leading Chinese IT-focused STEM education provider, has announced a private placement of 25,000,000 Class A ordinary shares for a total of US$2.0 million. The shares are priced at US$0.08 each, matching the ADS closing price on March 31, 2025.

The transaction, expected to close by April 7, 2025, includes a 180-day lock-up period for investors. The company plans to use the proceeds to expand into the AI-driven medical software industry. The private placement is exempt from registration under the Securities Act through Section 4(a)(2) and complies with Regulation D and/or Regulation S.

Positive

• Secured US$2.0 million in new funding through private placement
• Strategic expansion into AI-driven medical software industry
• 180-day lock-up period demonstrates investor commitment

Negative

• Significant shareholder dilution with 25 million new shares
• Low share price of US$0.08 indicates potential financial challenges

Insights

Financial Analyst

TCTM's US$2.0 million private placement represents a significant capital raising event relative to the company's $4.38 million market capitalization. The company is issuing 25 million Class A ordinary shares at approximately $0.08 per share, which requires careful interpretation given that each ADS represents five ordinary shares.

This financing appears structured to fund TCTM's strategic diversification from its core IT education business into the AI-driven medical software sector. While diversification can reduce business risk, the move into medical software represents a substantial pivot that will require different expertise, regulatory navigation, and market positioning - creating execution challenges.

The 180-day lock-up period for investors provides some confidence that this isn't a short-term speculation play. However, investors should note that the share issuance will result in considerable dilution given the company's current market capitalization.

TCTM's strategic shift comes amid intense competition in China's education technology sector following regulatory changes. The AI medical software market offers potentially higher margins but also introduces new competitive dynamics and regulatory hurdles that TCTM hasn't previously navigated.

While the capital infusion provides needed resources for growth initiatives, shareholders should closely monitor execution of this strategic pivot and whether management can successfully deploy capital in this new vertical.

Technology Strategist

TCTM's expansion into AI-driven medical software signals a significant strategic pivot from its established position in children's STEM education. This diversification reflects broader industry trends where companies leverage AI capabilities across different verticals to create new revenue streams.

The $2 million funding, while modest by technology investment standards, provides initial capital to establish presence in the highly competitive medical software space. The technical knowledge transfer between educational programming and medical applications could be more streamlined than it appears - both require robust algorithm development, user experience design, and learning frameworks.

However, TCTM faces substantial challenges in this transition. Medical software demands specialized domain expertise, stringent compliance with healthcare regulations, and deep integration with existing clinical workflows. The company will need to either acquire talent with healthcare technology experience or form strategic partnerships to overcome these barriers.

Additionally, TCTM's current business serves a B2C education market in China, whereas medical software typically operates in a B2B environment with longer sales cycles and different customer acquisition strategies. This business model transition will require significant adjustments to sales and marketing approaches.

While this diversification could eventually reduce market concentration risk, the short-term execution challenges shouldn't be underestimated as the company navigates an entirely new sector.

BEIJING, April 7, 2025 /PRNewswire/ -- TCTM Kids IT Education Inc. (NASDAQ: TCTM) ("TCTM" or the "Company"), a leading provider of IT-focused supplementary STEM education services in China, today announced that it has entered into share purchase agreements with certain investors on April 1, 2025. Under the share purchase agreements, the Company agrees to sell and issue an aggregate of 25,000,000 Class A ordinary shares of the Company for a total purchase price of US$2.0 million. The per share purchase price is approximately US$0.08, which is the closing sale price of the Company's American depositary shares ("ADSs") as reported by Nasdaq on March 31, 2025. Each ADS currently represents five of the Company's Class A ordinary shares.

Mr. Shaoyun Han, chairman of the Board., commented, "The financing proceeds will support our expansion into the AI-driven medical software industry, further diversifying our business. We are pleased that investors have confidence in our strategic initiatives and expansion plans. Looking forward, we will continue to execute our strategic plans and strive to create long-term value for our investors."

The closings of the transactions are subject to the satisfaction of customary closing conditions and are expected to take place no later than April 7, 2025. The investors have each agreed not to sell, transfer or dispose of any securities acquired in the transactions for 180 days after their respective closing dates.

The foregoing description of the private placement and the share purchase agreement does not purport to be complete and is qualified in its entirety by the full text of the form of share purchase agreement attached as an exhibit to a Current Report on Form 6-K to be filed with the U.S. Securities and Exchange Commission.

The sale and issuance of the Class A ordinary shares are exempt from registration under the Securities Act of 1933, as amended (the "Securities Act") pursuant to Section 4(a)(2) of the Securities Act regarding transactions not involving a public offering and is made in reliance on, and in compliance with, Regulation D and/or Regulation S under the Securities Act, as applicable.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy these securities, nor shall there be any offer, solicitation or sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

About TCTM Kids IT Education Inc.

TCTM is a leading provider of IT-focused supplementary STEM education services in China. Through its innovative education platform combining live distance instruction, classroom-based tutoring and online learning modules, TCTM offers IT-focused supplementary STEM education programs, including computer coding and robotics programming courses, etc., targeting students between three and eighteen years of age. Aiming to encourage "code to learn," TCTM embraces the latest trends in STEM education and technology to develop children's logical thinking and learning abilities while allowing them to discover their interests and potential.

Safe Harbor Statement

This current report contains forward-looking statements made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. TCTM may also make written or oral forward-looking statements in its reports filed with or furnished to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Any statements that are not historical facts, including any business outlook and statements about TCTM's beliefs and expectations, are forward-looking statements. Many factors, risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements.

View original content:https://www.prnewswire.com/news-releases/tctm-announces-us2-0-million-private-placement-of-class-a-ordinary-shares-302421609.html

SOURCE TCTM Kids IT Education Inc.

FAQ

What is the size and price of TCTM's private placement announced in April 2025?

TCTM announced a US$2.0 million private placement of 25,000,000 Class A ordinary shares at US$0.08 per share.

How will TCTM use the proceeds from the 2025 private placement?

TCTM will use the proceeds to expand into the AI-driven medical software industry, diversifying their business operations.

What restrictions apply to investors in TCTM's April 2025 share placement?

Investors agreed to a 180-day lock-up period, during which they cannot sell, transfer, or dispose of the acquired securities.

What is the conversion ratio of TCTM's ADSs to ordinary shares?

Each TCTM ADS represents five Class A ordinary shares of the company.