The IDP Education Ltd (ASX: IEL) share price came under pressure on Thursday afternoon and sank notably lower.
The student placement and language testing company's shares ended the day almost 6% lower at $22.86.
Why did the IDP Education share price tumble lower?
Investors were hitting the sell button this afternoon after the company released an update on the Education Australia shareholding.
According to the release, following a period of consultation, the Board of Education Australia has entered into an agreement with The British Council and the University of Cambridge regarding a restructure of its shareholding in IDP Education.
Under the restructure, Education Australia will deal with its 40% shareholding in IDP Education by making an in specie distribution of a 25% shareholding to all of its 38 University shareholders. This will mean those shareholders each become the direct owner of 1,831,159 shares in IDP Education.
The remaining 15% stake will be divested via a market selldown, which will occur no later than 11 December 2021.
The company notes that the restructure will not impact IDP Education's operations or strategy. Furthermore, IDP Education has agreed to not propose or recommend any amendments to the Director Majority Requirement in its Constitution.
It explained: "In broad terms, the 'Director Majority Requirement' requires that a majority of IDP directors be (a) where Education Australia has voting power in IDP of at least 10% – either independent or a representative of Education Australia, or (b) in all other circumstances – independent."
Why is Education Australia doing this?
In Education Australia's media release, it explained that it was doing this to allow its 38 Australian University shareholders to decide whether or not they wanted to continue holding IDP Education shares.
Education Australia had previously advised that COVID-19 has presented its shareholders with material financial challenges, and that their investment in the company represents a potential source of capital.
It remains unclear just how many of the 38 universities are wanting to cash in their shares. But, given that a number of brokers have buy ratings and price targets of ~$30.00 on its shares, I doubt those wanting to sell will be short of willing buyers.
