IBL News

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  • The ASU+GSV Summit Attracts Thousands of Attendees in San Diego

    The ASU+GSV Summit Attracts Thousands of Attendees in San Diego

    IBL News | New York

    With unprecedented measures against the COVID Delta variant — reflected in the request of double vaccination and PCR test for attendees — the leading EdTech conference in the world, the ASU+GSV Summit begun yesterday.

    Around 3,000 attendees flocked to San Diego’s Manchester Grand Hyatt Hotel, where the three-day event is taking place this week (9-11 August). A mix of wealthy investors looking for opportunities, rising start-ups, successful and aspiring entrepreneurs, academic presidents, and managers paid $3,500 for the entrance — nonprofit organizations paid one-third of it.

    Organizers managed the event smoothly, without the need to enforce the mandatory rule of wearing masks. The exception happened during lunchtime in the large ballroom of the hotel where hundred of attendees stayed maskless.

    The atmosphere among participants was relaxed. ASU+GSV insisted on the message, advertised on large screens, “We’re family”, in an attempt to calm the anxiety due to COVID / Delta. However, some speakers canceled at the last minute, afraid of the Delta variant spread. Moderators of the panels avoid mentioning it, and those speakers were simply removed.

    The 12th edition of the ASU+GSV adopted a hybrid format, with many talks broadcasted through the app. Virtual registration was free. The video stream worked fine.

    The event features 600+ speakers on a variety of subjects tackling higher-ed, K-12, workforce, and global education concerns. The summit includes the GSV Cup pitch competition for pre-seed and seed-stage education technology startups for $1 million in prizes. More than 700 startups have been judged by over 150 venture capitalists across the globe. The top 10 will compete at the summit, and the audience will vote for the winners.

    Arizona State University (ASU) President, Michael Crow, was once again the involuntary star due to his permanent focus on innovation. He participated in the first three panels in the morning, developed all in a tiny room packed with attendees. “We are at the beginning of innovation. Everything has been transformed except education,” he said.

    During the panel titled “Hollywood and Higher Ed Meet Up”, Michael Crow presented, along with film producer Walter Parkes, the Dreamscape Learn project, “a learning breakthrough initiative”, in his words.

    A staff of 125 people works on this exploration project based on creating immersive, Hollywood-quality virtual environments where students interact with an avatar.

    Crow criticized the fact that there is almost no national investment in education. “The U.S. laboratories are dedicated to everything but education.”

    Another initiative presented yesterday was the “Cintana Alliance,” a partnership between ASU and consultant and investor Doug Becker’s company, intended to introduce a new model for global universities.

  • Robinhood, Now Featured as a Meme Stock, Had a Wild Week with a Gain of 56%

    Robinhood, Now Featured as a Meme Stock, Had a Wild Week with a Gain of 56%

    IBL News | New York

    The free-commission trading app Robinhood (NASDAQ: HOOD) closed a wild week trading up with a gain of 56.5%, after another jump of 7.9% this Friday. The stock ranked among the most actively traded companies valued at more than $500 million. The surge added $30.2 billion of market value to the controversial start-up.

    This wild ride contrasted with the lackluster debut on the Nasdaq last week.

    Analysts agree to feature Robinhood — whose app helped fuel the memeification of the market — as a meme-stock. The presence of amateur investors fueling rallies is truly confusing fundamental analysts.

    “It has officially become a meme stock, and this week’s wild ride could be just the beginning if legions of amateur investors pull money from their old favorites to buy more shares while insiders are dumping them,” wrote Bailey Lipschultz for Bloomberg.

    This meme status resembled the stock rallies of AMC and GameStop earlier this year.

    Insisting on this volatility, Eric Schiffer, chairman of Patriarch Organization, a Los Angeles-based private equity firm, said, “investors need to recognize that this is going to trade like a crypto or other meme-related stocks in the short run and they could see significant positional changes.”  

    Skeptics note on Thursday’s 27% drop after the news that existing stockholders would sell up to 97.9 million shares over time. On Friday, Robinhood reiterated that it was not selling any stock for now.

    “Robinhood is not itself selling any additional securities but filed the Resale S-1 on behalf of certain of its shareholders pursuant to a pre-existing contractual obligation,” Robinhood said.

    Anyway, the SEC would need to approve any transaction after Robinhood’s second-quarter earnings on August 18.

    The three-day rally of the stock began on Tuesday and it was triggered by news that Cathie Wood’s exchange-traded funds were snapping up shares. It was refueled when options started trading Wednesday.

    The market consensus is that when meme traders strike, the volatility will be unprecedented like it’s happening with crypto stocks.

     

  • Robinhood Starts Its Retail Allocation for the App Traders Requesting to Participate in the IPO

    Robinhood Starts Its Retail Allocation for the App Traders Requesting to Participate in the IPO

    IBL News, Mikel Amigot | New York

    While striving for a valuation of up to $35 billion, Robinhood Markets Inc, the Menlo Park, California-based online brokerage has started the allocation of shares for its app traders.

    At a range of $32 to $42 per share, the firm said that it is seeking to raise about $2.2 billion.

    Since its inception, Robinhood raised $5.60 billion in 24 investing rounds with 56 investors involved. The company’s impressive growth is mostly due to the intuitive interface, zero commission, and cryptocurrency trading.

    With 18 million active retail traders, predominantly Gen Z and Millennials, with an overall client asset amount of $80 billion, Robinhood is trying to reshape how small-time traders invest in companies becoming public.

    As it advances toward its IPO and defying conventions, last Saturday, the startup hosted a live-stream roadshow presentation — with telepromptered answers. All of Robinhood’s app customers received an email invitation to attend. Typically, this type of event is limited to institutional investors and hedge funds.

    The Silicon Valley startup that popularized commission-free trading is reserving 20% to 35% of its shares for traders of the app, an unusual move for a high-profile offering.

    The company is expected to start trading on the Nasdaq Stock Market on July 29, under the ticker HOOD.

    For users, the max share is at $50.40, which results after adding a 20% buffer on the highest price in the range. Users’ orders remain valid if the final price of the IPO is within this 20% range. If the price moves outside the 20% buffer or is above the max share price, the trader will need to reconfirm its request – all of it through the app.

    CEO and Co-Founder, Vlad Tenev said during the live-streaming event, “We anticipate this will be one of the largest retail allocations ever.” 

    “At Robinhood, the rich don’t get a better deal” is one of the company’s mottos.

    Regarding its controversial revenue-making practice of “payment for order flow” (PFOF)— under which Robinhood receives fees from market makers like Citadel Securities for routing orders to them —, CFO Jason Warnick, said, “If a ban or other limitations on it were to be imposed, we believe Robinhood and the industry would adapt and explore other revenue sources.”

    Beyond the fees by routing its users’ orders — about 81% of its revenue; Robinhood receives an average of 2.5 cents for every $100 traded —, another source is Robinhood Gold membership, which gives clients access to investment tools and margin loans for $5 per month. There is also stock and cash interest.

    The business model of PFOF is being scrutinized by the SEC amid concerns that it creates a conflict of interest because retail traders aren’t getting the best trading execution available.

    Another announcement during the webcast is that Robinhood Markets Inc is considering launching U.S. retirement accounts, like IRAs and Roth IRAs, which would allow Robinhood to tap a gigantic market. Currently, there are $12.6 trillion in IRAs.

    Investment Retirement Accounts attract long-term investment, setting tax penalties when withdrawing money.

    “We are interested in building more account types, including IRAs and Roth IRAs, we’ve been hearing that a lot from our customers. We want to make first-time investors into long-term investors,” Tenev said.

    Robinhood was founded in 2013 by Vlad Tenev and Baiju Bhatt, at that time roommates at Stanford University. They will hold two-thirds of the voting power after the IPO, as the prospectus showed.

    Some experts have warned about Robinhood’s revenue models, regulatory practices, and exaggerated valuation based on a price/sales ratio of 26.

    Today, Robinhood is the third-largest brokerage firm based on the number of funded accounts, right behind Fidelity and Charles Schwab (which purchased TD Ameritrade in 2020).

    However, its CEO is not licensed by FINRA as a registered investment advisor.

    This is the Q&A at the roadshow virtual session.

     

    • IBL News, July 3: Trading App Robinhood Files Its IPO, Targeting a Valuation of $40B

  • Thoma Bravo-Engineered Financial Operation of Instructure Got a Good Reception

    Thoma Bravo-Engineered Financial Operation of Instructure Got a Good Reception

    IBL News | New York

    Thoma Bravo-controlled Instructure Holdings Inc. (NYSE: INST) returned to the secondary market yesterday after the company that owns Canvas LMS priced its initial public offering of 12.5 million shares at $20 apiece — meaning the company estimates it will raise $250 million, mostly intended to cut its debt of $778 million in the long term.

    Executives of the company rang the opening bell at the NYSE today, as shown in the pictures and video below.

    The registration statement was filed at the SEC on July 21, 2021. The offering is expected to close on July 26, 2021.

    The stock closed at $20.69, after a gain of 4.90% on its first day of trading. The market capitalization was 2.95 billion.

    It was a successful debut for Thoma Bravo, the investment equity company that took Instructure private last year in a deal valued at $2 billion. The Salt Lake City, Utah – based start-up first went public four years ago.

    The finance company will own 88% of the stock after the offering, or 87% if the overallotment option is exercised in full. Instructure granted the underwriters a 30-day option to purchase up to an additional 1.8 million shares at the IPO price.

    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.

     

    • IBL News, July 14, 2021: Instructure / Canvas LMS Details Its IPO: A Valuation of $2.9 Billion Expected

  • Skillsoft Reduces Its Long-Term Debt by $130M and Increases Cash Flow for Acquisitions

    Skillsoft Reduces Its Long-Term Debt by $130M and Increases Cash Flow for Acquisitions

    IBL News | New York

    Boston-based corporate training Skillsoft Corp. (NYSE: SKIL) announced yesterday it successfully completed its debt refinancing. Now the company has $480 million of long-term debt outstanding.

    A press release indicated: “The company closed a new $480 million senior secured term loan B facility. This facility, along with cash on hand, will be used to refinance and repay the company’s existing term loan facilities, thereby reducing long-term debt by approximately $130 million.”

    “The new term loan B facility reduces Skillsoft’s interest rate by 300 basis points and extends its maturity from 2025 to 2028. Together, the refinancing and debt paydown will decrease the company’s annual interest payments by approximately $25 million.”

    Jeffrey R. Tarr, Skillsoft’s Chief Executive Officer, explained, “We are pleased to complete our refinancing, which strengthens our balance sheet, increases our free cash flow, and provides substantial financial flexibility to execute on our organic and acquisitive growth plans.”

    Last month, Skillsoft acquired professional development and executive individualized coaching SaaS platform Pluma for $22 million in cash. Pluma’s coaching experience, via in-app messaging and video sessions, will be integrated into Skillsoft’s AI-driven Percipio platform.

    Also, in June, Skillsoft started to trade in Nasdaq. On June 14, the stock opened at $10.90 per share. Yesterday, it closed at $9.10. The stock loss, about 15%, reflects that investors haven’t rewarded Skillsoft’s refinancing efforts and growth strategy to date.

    Skillsoft claims it serves training to 70% of the Fortune 1000.

    This year, courses with the most completions are:

    1. Software Data Analysis: Project Management Metrics
    2. Introduction to Artificial Intelligence
    3. Data Science Overview
    4. SQL Concepts & Queries
    5. Machine Learning
    6. Artificial Intelligence: Basic AI Theory
    7. Automation Design & Robotics
    8. Applying Predictive Analytics
    9. Data Access & Governance Policies: Data Access Governance
    10. Machine & Deep Learning Algorithms: Introduction

    Meanwhile, courses with the most consumption hours are:

    1. Business Reporting: Getting Started with Power BI Desktop for Data Analysis
    2. SQL Concepts and Queries
    3. Power BI Desktop Bootcamp: Session 1 Replay
    4. Software Data Analysis: Project Management Metrics
    5. Business Reporting: Visualizing & Merging Data in Power BI

    Most liked courses:

    1. Power BI: Getting Started with Data Analytics
    2. Introduction to Artificial Intelligence
    3. Data Science Overview
    4. SQL Concepts & Queries
    5. Power BI: Data Modeling & Visualization
    6. Relational Database Concepts
    7. Software Data Analysis: Project Management Metrics
    8. Power BI: Data Preparation
    9. Big Data Essentials
    10. Power BI: Data Sourcing

     

     

     

  • 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