Editorial, CNBC Indonesia
Tech
Friday, 02/16/2024 21:00 WIB
Photo: 2U edutech startup. (Doc. 2U)
Jakarta, CNBC Indonesia – A decade ago, education (ed-tech) startup ‘2U’ took the floor on the US stock exchange. Investors are optimistic about the company’s future, because the potential for growth in technology-based education is currently booming.
During the IPO in 2014, the share price was sold at US$ 13 per share. Four years later, 2U broke the record for the highest share price of US$ 98.58.
In its heyday, 2U had a market capitalization of more than US$ 5 billion or the equivalent of IDR 78 trillion. At that time, his income jumped 44%.
However, those glory days are now just a memory. 2U’s share price is now trading below US$ 1, quoted from CNBC International, Friday (16/2/2024).
One of them is because many universities have ended their collaboration contracts with 2U. This week, 2U gave investors bad news.
Management predicts difficult times for the year ahead. In fact, the company admits that it doubts it can maintain its business continuity without additional capital or debt reduction.
After the announcement, 2U shares fell 59%. On Wednesday (15/2), 2U closed trading with a share value of 34 cents per share. Its market capitalization value fell to US$ 27.5 million.
Analysts at Needham lowered their recommendation to buy 2U shares after the report. They admitted they were skeptical about 2U’s future.
“We do not want to speculate on future potential,” said a 2U spokesperson.
“2U hopes to continue constructive cooperation with lenders and other financial authorities. We will also evaluate various options to strengthen our balance sheet and adapt to the current business landscape,” he continued.
2U was founded in 2008 and was originally named 2Tor. The business model targets university entities, by offering online classes so that more students can enroll.
In 2017, 2U earned half of its revenue from the University of Southern California, Simmons College in Boston, and the University of North Carolina.
Slowly, 2U began to diversify its business and in 2021 its university partners only contributed less than 10% of total revenue.
The biggest problem is that the 2U business model has never been proven to produce a profit. 2U continues to lose money as a public company. Over the last three years, the total losses have been more than US$ 830 million or around Rp. 12.9 trillion.
Most of 2U’s revenue is allocated to sales and marketing initiatives. Companies must also increase technological and production resources to support user growth. This was conveyed in the 2021 annual report.
Then, 2U was also considered not to be careful in safeguarding its capital. In 2019, 2U paid more than US$ 600 million to annex Trilogy Education. The goal is for 2U to get more university partners.
Then, in 2021, 2U again announced the purchase of the online education platform edX for US$ 800 million. The acquisition gives 2U more than 230 educational partners, including 19 universities worldwide.
However, 2U’s big plan did not produce the results as expected. 2U took out a loan to acquire edX and disrupted its balance sheet. This is because loan interest is greater than income from edX, according to analysts at Cantor Fitzgerald.
In early 2022, sales growth will decline to single digits. Then in the middle of the year it started to go minus. The company’s revenue fell for 5 consecutive quarters and resulted in layoffs in several waves.
Q3 2023 will be the peak of 2U’s demise. The company told investors last November that USC, its largest client, had decided to terminate the contract by paying US$ 40 million to 2U.
The shares immediately fell 57% in one day. Plus, CEO Chip Paucek resigned a few days later. He was replaced by the CFO at that time, Paul Lalljie.
For information, stock values below US$ 1 for 30 consecutive days are at risk of being removed from the Nasdaq. However, Lalljie admitted that he was still optimistic.
“We need to sink to grow,” he said.
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2024-02-16 14:00:00
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