IBL News

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  • Instructure / Canvas LMS Details Its IPO: A Valuation of $2.9 Billion Expected

    Instructure / Canvas LMS Details Its IPO: A Valuation of $2.9 Billion Expected

    IBL News | New York

    Thoma Bravo-controlled Instructure Holdings Inc., the owner of the leading Canvas LMS, announced yesterday the terms of its initial public offering (IPO) in an amended prospectus filed to the SEC.

    Private equity firm Thoma Bravo is offering 12.5 million shares of its common stock. The IPO price will be between $19.00 and $21.00 per share.

    This would allow the company to raise net proceeds of about $228.1 million at a $20 midpoint. That funding would help cut its debt: $778 million in the long term. Educational consultant Phil Hill wrote that “this is a move by Bravo to manage the debt the company took on as part of the purchase.”

    Thoma Bravo will still own the vast majority of shares in Instructure after this IPO, using a complex system of holding companies, stock splits, and dilutions plans.

    The actual public offering would lead to an estimated raise of $250 million.

    Those offered shares are a small part of the total number of shares, however, and Thoma Bravo will retain the rest.

    After the offering, Thoma Bravo will own around 87% of the stock. “As a result, we expect to be a “controlled company” within the meaning of the corporate governance standards of NYSE,” said the company in the prospectus.

    Utah-based Instructure’s (NYSE: INST) expects to be valued at up to $2.91 billion, according to MarketWatch. In March 2020, private equity firm Thoma Bravo took Instructure private in a deal valued at about $2 billion.

    During the first three months of 2021, Instructure had revenue of $94.0 million and a net loss of $33.1 million, according to the filing.

    The underwriters of the IPO have reserved 5% of the stock to be offered in the IPO to be sold to the senior leadership of the company through a directed sale program.

  • More Views on What 2U’s Purchase of edX Will Mean for Higher Ed

    More Views on What 2U’s Purchase of edX Will Mean for Higher Ed

    IBL News | New York

    MIT and Harvard’s sale of edX.org to 2U for $800 million continues to dominate the conversation on higher education. New views in favor and against are expressed through articles and forums.

    Paul LeBlanc, President of Southern New Hampshire University (SNHU), one of the largest universities in the U.S., wrote a column on Forbes titled “What 2U’s $800 Million Deal to Acquire edX Means for Higher Ed”.

    “For 2U, the acquisition provides not only leads in those markets but also viable product offerings. In an earnings call last week, 2U made the math clear: if it converts only .03% of registered edX learners into its regular offerings, it will reduce the cost of student acquisition by 10% to 15%. Cost of acquisition is huge in online education, 20% or more of the overall budget.”

    “If 2U’s acquisition of edX brings more affordable post-secondary higher education options to more people around the globe with good demonstrable outcomes, then it seems like a good change in the ecosystem for students.”

    The leading newspaper the industry, The Chronicle of Higher Ed, posted an article by Jefferson Pooley, Professor of Media and Communication at Muhlenberg, stating that “MIT and Harvard sold their higher education future, auctioning off the lecture halls of the future.”

    “Harvard and MIT have just made the same disastrous miscalculation. Nonprofits aren’t supposed to flip like this. The edX deal seems to have met the letter, if not the spirit, of nonprofit law by selling off its assets — and by parking the $800 million in a new Harvard-MIT nonprofit with a gauzy “inclusive learning and education” mission.”

    “2U’s mission is fundamentally misaligned with the university tradition. 2U, Coursera, and their venture-funded competitors are built to squeeze profit from our students, using our faculty and course offerings. Harvard and MIT had no right, in the meaningful sense, to sell us off. None of us — not faculty members, not students — signed up for edX to increase Silicon Valley’s wallet share. We will look back on this careless abrogation of stewardship as the tragic squandering that it is.”
    On Inside the Higher Education, columnists focus mostly on ideas towards the new, yet-unnamed nonprofit that MIT and Harvard will create, beyond the officially announced goals of “stewarding and enhancing the Open edX platform“, along with “developing new ways to make online learning more effective, engaging, and personalized.
    Steven Mintz, Professor of History at the University of Texas at Austin, elaborates on “How I’d Spend $800 Million”, suggesting to “do something major”, and states: “There’s a good chance that the $800 million might not materialize in whole or at once. Payments, even in cash, often extend over time.”

    “The single biggest question that needs to be asked is this: Why is it that the edX partners — which include the most highly ranked universities in the world — weren’t able to create a nonprofit open learning endeavor that could successfully compete with for-profits?”

    “Now is the time to look forward by reaffirming edX’s founding vision: to create a cross-institutional collaborative that will address higher ed’s biggest challenges: access, affordability, equity, and attainment.Edward J. Maloney, Professor at Georgetown University, recommends that “the new nonprofit should look beyond online learning and into areas of learning innovation and the scholarship of institutional change.”

    “Both MIT and Harvard are already internationally renowned for their activities in learning science, education scholarship, and research on organizational change.” (…) “Harvard and MIT now have the opportunity to create a new nexus of scholarly inquiry, one that integrates the study of learning and institutional change. Such a focus for the new nonprofit would both continue with, and expand on, the original mission of edX.”

    “This new nonprofit can help to continue edX’s original mission to harness the “transformative power of education.”

    Additional Resource:
    •     Edward J. Maloney and Joshua Kim in Inside Higher Ed, July 13, 2021: External Partnerships and Higher Ed’s Mission of Critical Analysis

  • Trading App Robinhood Files Its IPO, Targeting a Valuation of $40B

    Trading App Robinhood Files Its IPO, Targeting a Valuation of $40B

    IBL News | New York

    The popular stock trading app for consumers, Robinhood, with 17.7 million active users in its platform, officially filed to go public yesterday, posting its S-1 filing. It will be listed under the symbol “HOOD” in the NASDAQ. According to experts, Robinhood is targeting a valuation of $40 billion.

    The public listing comes after a period of steep growth in crypto trading and a heavy reliance on order-flow payment — a controversial practice of selling trade orders to market makers. Payment for order flow accounted for 81% of Robinhood’s revenue in the first quarter. Options trading brought $198 million. Cryptocurrencies’ revenue rocketed to 17%. More than a third of that cryptocurrency revenue came from joke currency Dogecoin trading.

    Robinhood saw its revenues soar from $277.5 million in 2019 to $985.8 million in 2020. During the first quarter of 2021, it generated revenues of $522.2 million and operating expenses of $463.8 million.

    Notably, Robinhood was profitable in 2020, generating a net income of around $7.4 million during the one-year period.

    However, in the first quarter of 2021, the company lost an epic $1.49 billion. The large loss was due to a fair-value adjustment to convertible notes and warrants that were used to raise emergency funding during the GameStop saga.

    Robinhood is reserving 20% to 35% of its IPO shares for users.

    The filing for IPO came two days after of a landmark fine of $70 million from FINRA, as a result of misleading information.

    To help guide it through its stock market debut, Robinhood has picked Goldman Sachs and JP Morgan as joint lead book-running managers.

    Robinhood raised $3.5 billion this year alone.

  • Wall Street Receives 2U’s Purchase of edX with Gains

    Wall Street Receives 2U’s Purchase of edX with Gains

    IBL News | New York

    While MIT’s and Harvard’s nonprofit edX and publicity traded 2U Inc (NASDAQ: TWOU) continue promoting the advantages of its $800 million deal, the capital markets remain moderately optimistic.

    Since the announcement of the purchase of edX’s brand and nearly all of its assets (on June 29th), the stock is up around 4%, to $42.22 — as it closed this Friday, July 2.

    The market capitalization is $3.14 billion, still far beyond competitor Coursera, with $5.72 billion.

    Edward J. Maloney and Joshua Kim academic experts wrote that “the No. 1 reason as to why this deal is happening, it would be Coursera.”

    “A well-capitalized online platform company like Coursera represents a potentially existential threat to the traditional online program management model, at least in the medium to long term.”

    In addition, 2U and similar OPMs (Online Program Manager) companies spend around 20% of their revenue on client acquisition (paying students), while Coursera’s 80 million global learners allow them to spend considerably less. edX claims to host 39 million registered learners.

    Driving down student acquisition costs, by turning free or low-cost students into paying customers, would allow 2U to scale more rapidly and at a lower cost.

    Coursera can be a strategic threat to existing OPMs, by offering bundled (OPM-like) services, such as instructional design, project management, media, and marketing.

    Regarding edX, MIT and Harvard’s executives implicitly admitted that Coursera’s successful IPO and its well-capitalized strategy made it difficult for a nonprofit to fully compete in the platform space.

    After paying $800 million in cash, education technology provider 2U plans to offer more than 3,500 programs to some 50 million customers globally. The transaction is expected to close in the fall, following regulatory and governmental approval.

    2U did warn that the acquisition could lower its EBIDTA (earnings before interest, taxes, depreciation, and amortization) by a low single-digit percentage on an adjusted basis in 2022. It expects the edX assets will add to earnings in the following year.

    edX will continue to be a public-benefit entity under the umbrella of 2U, allowing ongoing free class auditing and credentials for those seeking lower-cost degrees.

    Analysts said that rising higher education costs make offerings, like edX attractive to students seeking alternative, lower-cost degrees, and certification.

    The shift to remote learning, due to the COVID-19 pandemic, has been a boon to Chegg and 2U, two publicly traded education technology companies that provide everything from tutoring services to online curriculums.

     

     

    [Disclosure: IBL Education, the parent company of the IBL News service, uses Open edX software on its platform, and provides custom ecosystems to organizations mentioned in this report and others firms.]

  • Flooded With Cash and the Open edX Software, MIT and Harvard Start to Shape their New Non-Profit Venture

    Flooded With Cash and the Open edX Software, MIT and Harvard Start to Shape their New Non-Profit Venture

    IBL News | New York

    The new, yet-unnamed, educational nonprofit that MIT and Harvard will govern together and will continue to own, advance, and enhance Open edX, MIT said yesterday. It’s expected to be a very different venture from the existing edX Inc, which will be owned by purchaser 2U, becoming a subsidiary registered as a public benefit company.

    It will start with a whopping amount of $800 million in cash paid by 2U and the property of the Open edX software. “It will explore new ways to make online learning more effective, engaging, and personalized,” said MIT.

    Once the transaction is completed, within the next four months, “the nonprofit will aim to do what edX could not: invest at the necessary scale to sustain Open edX as a fresh, vital, open-source learning platform for the world, and tackle the next great research challenges in online learning.”

    “It could, for example, invest in the potential of artificial intelligence to make online learning more responsive and personalized to the individual learner.”

    According to MIT’s President, L. Rafael Reif, the nonprofit mission, focus, agenda, aspirations, and research program will be developed following consultation with faculty of both MIT and Harvard.

    A non-disclosed part of those $800 million in proceeds that 2U paid for the edX brand, course catalog, business, and partners, will be used “to repay a recent line of credit from MIT and Harvard.”

    MIT and Harvard revealed that over the years they contributed $80 million total ($40 million each) to edX. The two institutions said that “they will not recoup those funds from the sale.”

    However, the influx of hundreds of millions of dollars will go to the new non-profit venture. The new venture will keep a non-defined number of employees of the existing edX. Others will work for 2U. The role of CEO Anant Agarwal is not clear yet.

    “He will have many options and opportunities to consider, including potentially with the public benefit company edX or the nonprofit MIT and Harvard will govern,” MIT said.

    MITx Online Will Use the Open edX Software

    On the other hand, MIT Open Learning will develop a new world-facing platform called MITx Online, which will host only the institute’s MOOCs. It will not aggregate content generated by other universities. MITx Online will use the Open edX software. OpenCourseWare and the Open Learning Library will continue working.

    2U’s “Marketing Advantages”

    In the meantime, publicly-traded 2U elaborated on the marketing advantages that it will achieve.

    Through a set of slides [PDF download], 2U executives told investors and reporters that the deal will harness the  “marketing engine” of their company with the well-known brand and course marketplace of edX, especially in terms of client acquisition’s cost.

    2U predicts it could convert 0.03% of edX’s users into paying customers. This would lower its marketing costs by $4,000 per enrollment and save 2U $40 to $60 million annually.

     

    [Disclosure: IBL Education, the parent company of the IBL News service, uses Open edX software on its platform, and provides custom ecosystems to organizations mentioned in this report and other firms.]

     

    • IBL News, June 29, 2021: 2U Buys MIT’s and Harvard’s edX Platform for $800M; Open edX Software Kept as Non-Profit

  • 2U Buys MIT’s and Harvard’s edX Platform for $800M; Open edX Software Kept as Non-Profit

    2U Buys MIT’s and Harvard’s edX Platform for $800M; Open edX Software Kept as Non-Profit

    IBL News | New York

    In a surprising deal, 2U Inc. (Nasdaq: TWOU) announced yesterday that it will purchase edX Inc. — a nonprofit founded by MIT and Harvard University — for $800 million in cash.

    With the transaction, Online Program Manager (OPM) 2U will acquire all edX assets, including the brand, the website with 50 million learners, a marketplace with 230 university and corporate partners, and 3,500 digital programs.

    The $800 million proceeds will flow to a new, still unnamed nonprofit led by Harvard and MIT that “will collaborate with educational institutions, governments, and other organizations to develop and evaluate new approaches to learning and pedagogy.”  This non-profit will maintain the open-source platform Open edX, according to the press statement.

    2U stated that it plans to operate edX under its umbrella “as a public benefit entity, a class of purpose-driven organizations that balances the interests of shareholders with other stakeholders.” It means that the new edX will operate as a for-profit company, as MIT confirmed.

    The Lanham, Maryland – based company said that “it has also committed to continuing to fulfill the edX mission by, among other things, guaranteeing affordability through the continuation of a free track to audit courses.”

    In addition, 2U ensured that it will contribute “to the ongoing development of the fully open-source and independent platform Open edX.”

    2U and edX described the deal as “an industry-redefining combination that will help power the digital transformation of higher education, expand access and affordability, and usher in a new era of online learning.”

    A themed, PR website called Transformingdigitaleducation.com was specifically created to announce the transaction.

    With over 80 top universities as customers, 2U said was expecting “to approach $1 billion in yearly revenue by the end of 2021.”

    In 2020, edX revenues were 84.6 million, and its operating loss $17.4 million, according to public records.

    “By combining 2U and edX’s global reach and offerings from free to degree, together we believe we can fully realize our shared vision, meet the growing worldwide demand for online education, and deliver growth and long-term value to shareholders and other stakeholders,” said 2U Co-Founder & CEO, Christopher “Chip” Paucek.

    “As edX looks to its next phase of growth and impact, joining forces with 2U marks a major milestone in our evolution,” said Anant Agarwal, Founder, and CEO of edX and MIT Professor.

    “Today’s announcement will carry forward this mission on a whole new scale, connecting many more learners with a wider range of high-quality options for content, credentials and degrees. With online education rapidly changing, it’s the right moment for this leap of evolution for edX,” said Harvard president Larry Bacow and MIT president Rafael Reif in a joint statement. “At the same time, the nonprofit that emerges from this transaction will enable us and our partners to support innovation that enhances learning for all and, we hope, play a catalytic role in closing the learning gap that exists for far too many.”

    2U said that it will contribute to supporting the Open edX platform, despite it will belong to MIT and Harvard’s new non-profit company. “Following the closing, 2U expects to be a significant contributor of code to the Open edX platform, and the transaction is expected to increase the impact that Open edX can have in supporting learning outcomes around the world. Open edX currently powers approximately 2,400 learning sites worldwide.”

    • MIT’s view: MIT and Harvard agree to transfer edX to ed-tech firm 2U

    • Harvard’s view: Harvard and MIT-led nonprofit to tackle longstanding inequities in education

    • MIT News: FAQs on agreement to sell edX to 2U, Inc. and fund nonprofit to reimagine digital learning

  • Coursera’s Stock Price Drops Despite Analysts’ Endorsement

    Coursera’s Stock Price Drops Despite Analysts’ Endorsement

    IBL News | New York

    Coursera (NYSE: COUR), which became public on March 31st, dropped on Wednesday the 5th almost 8%, despite receiving analysts’ support regarding the first-quarter report. Investors still consider that the educational company is overvalued. On Thursday, the stock suffered another significant decline of 7.21%, until $38.98.

    The online learning platform announced a loss per share of 40 cents, compared to 45 cents a year earlier, with revenue of $88.4 million, versus $53.8 million for the same period in 2020, a growth of 64%.

    Net loss was $18.7 million or 21.1% of revenue, compared to $14.3 million or 26.6% of revenue a year ago.

    The company forecasted second-quarter revenue of $89 million to $93 million.

    In its initial public offering, Coursera (ticker: COUR) sold 15.73 million shares at $33 each. The stock has since rallied about 36%. On Wednesday, shares were down to $42.

    Josh Baer, from Morgan Stanley, wrote: “Coursera beat every estimate and metric we track in Q1, and we see positive estimate revisions ahead as the durability of growth and margin expansion is underestimated.”

    Analyst Sarang Vora, from Telsey Advisory Group, said: “We believe Coursera’s consistent focus on growing its content catalog and member base, combined with enhancements to its technology platform, should continue to boost results in 2021 and beyond.”

    Coursera’s CEO Jeff Maggioncalda was optimistic: “We believe the digital transformation of higher education is only in the early innings, and we see many opportunities to drive growth for Coursera in the years ahead.”

    “During the first quarter, we demonstrated our ability to scale all parts of our business with revenue growth of 64% year-on-year,” said Ken Hahn, Coursera’s CFO. “Our freemium model allows us to acquire learners at a low cost and meet their lifelong learning needs with a growing selection of premium, job-relevant content, and credentials.”

    Coursera disclosed other interesting data regarding its day-to-day operations:

    • The company added 5 million new registered learners during the quarter for a total of 82 million.
    • Enterprise revenue for the first quarter was $24.5 million, up 63% from a year ago. Paid Enterprise Customers increased 84% from a year ago to 479 businesses, governments, and campuses.
    • Degrees revenue for the first quarter was $12.0 million, up 81% from a year ago as prior cohorts scale and students begin newly launched programs. The total number of Degrees Students reached 13,493, up 88% from a year ago.

     

    • Coursera: Coursera Reports First Quarter Fiscal 2021 Financial Results

  • President Biden Proposes Two Years of Free Community College

    President Biden Proposes Two Years of Free Community College

    IBL News | New York

    President Biden announced on Wednesday a new $1.8 trillion plan — the American Families Plan — that would provide, among other things, two years of free community college for all Americans. There are over 950 community colleges in the U.S. A total of 30 states already cover tuition at community colleges or universities.

    The plan also would cover the tuition of low and middle-income students attending over 800 existing historically Black colleges and universities, tribal colleges, and other minority-serving institutions.

    Additionally, it would up the maximum Pell Grant for students in financial need by $1,400, bringing the award to $8,295 a year.

    These safety net programs would benefit institutions and students with the fewest financial resources.

    Altogether, the Biden Administration would spend $302 billion over 10 years as part of his American Families Plan:

    • $109 billion for two-year colleges,
    • $80 billion addition for Pell Grants,
    • $62 billion for retention and completion efforts,
    • $39 billion for two free years at minority-serving institutions for most students.

    The plan is less ambitious than Biden’s campaign promise of making public four-year colleges tuition-free for many Americans and doubling the Pell grant.

    The American Council on Education said that the community college plan could “easily revolutionize access to higher education in the United States.” Other reactions in higher education have been largely positive.

    However, the plan won’t be easy to get through Congress, as it is likely to face opposition from the Republican Party.

  • Coursera Rallies 36% on Its Debut, Giving the Company a Whopping Valuation of $5.8 Billion

    Coursera Rallies 36% on Its Debut, Giving the Company a Whopping Valuation of $5.8 Billion

    IBL News | New York

    Coursera stock rose 36% Wednesday, closing at $45 a share, on its first day of trading on the NYSE (New York Stock Exchange).

    This surge gave the online learning platform a whopping market valuation of $5.86 billion, despite the company is still unprofitable.

    On Tuesday, Coursera priced its 15.73 million shares of the IPO at $33 a share, at the high end of Coursera’s expected range of $30 to $33.

    In its offering, the company raised nearly $520 million at an implied $4.3 billion valuation.

    Prior to its debut, Coursera was last valued in the private market at $3.6 billion.

    As shown in the picture above, Coursera’s founders and CEO rang virtually the opening bell of the New York Stock Exchange today, as the whole event was online, due to the pandemic.

    Jeff Maggioncalda, CEO at Coursera said to EdSurge that the new influx of money would be used to build more AI-based teaching.

    “We are always building more AI into the teaching experience and the learning experience,” he said. “On the learning side, that means more personalized learning. On the teaching side, [it means] improved student-success dashboards that predict every student’s grade every day and predict the chance that students stop [out of] the degree program.”

    The stock trades under the ticker symbol “COUR.”

     

    [Written by Mikel Amigot]

    • Coursera CEO on IPO: this was a ‘good time’ for public debut

    • News about Coursera at IBL News

     

     

  • Has Coursera’s Freemium Push Been Worth it? Analysts Examine the Company’s IPO Prospectus

    Has Coursera’s Freemium Push Been Worth it? Analysts Examine the Company’s IPO Prospectus

    IBL News | New York

    Coursera’s S-1 IPO filing, a 240 pages document that contains a trove of unknown data continues to be analyzed inside the higher ed community.

    Dhawal Shah, founder and CEO at Class Central and one of the most influential writers in the higher ed industry, said: “So to me, this S-1 feels like the series finale of a TV show I’ve been following for ages: all the plots and subplots have been resolved. I finally get to discover whether my theories and speculations over the years were correct.”

    Joshua Kim, educator and columnist at Inside Higher Ed, wrote that the SEC filing of Coursera is “all about risk communication”. “The worry, I think, is that publicly exposing our institutional risk factors would be too risky. Talking about how things could go wrong for our school could end up being a self-fulfilling prophecy.”

    One of the most remarkable points is the fact that the company is still unprofitable (with a net loss of $67 million, up 46% from the previous year’s $46.7 million) despite the pandemic’s general lift to its business and customer base and its gigantic fundraising.

    This questions whether the company’s freemium model used to get a large top-of-funnel pool of free users has been worth it.

    A big question is if the company is too dependent on universities (4,000 of them) as a revenue generator at a moment when institutions are discovering that they can attract an equal number of leads and can use similar technology [the Open edX platform is open-source].

    The enterprise business side — which encompasses Coursera for Campus — has been an easy business, with significant growth in recent years, from $48.3 million in 2019 to $70.8 million in 2020, and with 387 paid enterprise customers. The conclusion is that there is much potential for future growth.

    In the IPO filing, Coursera recognizes that its business model operations are volatile and unpredictable.

    “Our recent, rapid growth may not be indicative of our future growth and we expect our revenue growth rate to decline compared to prior years. (…) “We have incurred significant net losses since inception, and anticipate that we will continue to incur losses for the foreseeable future.”

    “We may need to change the contract terms, including our pricing model, for the course content and credentialing programs offered on our platform, which in turn would impact our operating results.”

    Beyond this, the risks associated with Coursera, as a Delaware public benefit corporation, are significant, as Joshua Kim reflects in his column.