WELCOME TO THE EYE
OF THE STORM
#HURRICANETWOU
STEP 1: REVIEW CITRON RESEARCH 2015 ON $TWOU STOCK KEY POINTS:
“ITS ‘FOR PROFIT EDUCATION’ IN A SILLY DISGUISE”
HEAVY UPFRONT INVESTMENT TO ATTRACT STUDENTS (% OF TUITION DEDICATED TO MARKETING TO NEW STUDENTS - $16,000 PER STUDENT)
“LEVERAGES” UNIVERSITY BRAND NAMES (IRONY HERE IS UNCANNY)
IDENTIFIES ISSUES IN MAINTAINING ACADEMIC COMPETITIVENESS OF STUDENT POPULATION FIT FOR PROGRAM VS. REVENUE
INVESTS $5-$10M PER PROGRAM IT LAUNCHES (HENCE HEAVY BUY OUT CLAUSES FOR UNIVERSITIES)
RATED “F” IN INVESTABILITY
STEP 2: REVIEW 2U STUDENTS VS USC & 2U:
ADVERTISED FRADULENT RANKINGS
2U RECIEVING 60% OF REVENUE OF TUITION
FEDERAL REGULATIONS PROHIBIT INSTITUTIONS FROM COMPENSATING RECRUITERS
2U & USC “CHERRY PICKED” DATA IT DISCLOSED ABOUT COMPETITIVENESS AND SELECTIVITY OF ITS ADMISSIONS
USC DID NOT MEANINGFULLY RESTRICT THE NUMBER OF STDUENTS WHO COULD ENROLL IN THE PROGRAM
ADVERTISING THE TRUTH WOULD CAUSE THE SCHOOL TO “DROP LIKE A ROCK IN THE RANKINGS”
STEP 3: Lets take University of North carolina’s MBA PRogram as an example.
STUDENT PAYS: $126k
UNC GETS: $50,400
2u GETS: $75,600
WHAT DO YOU THINK OF THAT REVENUE SPLIT? HOW DO YOU FEEL ABOUT THE USE OF $126k in LOANS FOR $50k DIRECTLY TO YOUR SCHOOL?
STEP 4: FORBES 2012 INTERVIEW WITH CHIP PAUCEK:
“Shouldn’t eliminating on-campus costs such as classrooms, dorms, and parking lots translate to savings for students? Paucek says, “The notion that online is somehow a cost-saving mechanism is simply incorrect. You’re only saving cost if you make the experience low quality. We partner with a school that wants to become preeminent in their field online. We will not partner with a school if they expect to see online be discounted in any fashion.”
STEP 5: LA TIMES COVERAGE OF THE USC & 2u SPLIT
“You can argue that 2U wouldn’t exist without USC.” On a call with investors Friday, he said that “ultimately, the programs we agreed to exit [from USC] no longer align with our platform strategy.”
SO WHAT IS THE DIFFERENT STRATEGY EXACTLY?
HOW COULD YOUR FIRST CLIENT EVER NOT ALIGN WITH YOUR STRATEGY?
IS THE PROGRAM NOT EXPENSIVE ENOUGH?
STEP 6: 2U ACQUIRES EDX FROM HARVARD & MIT FOR $800M ON A LOAN (IRONIC)
“There is an urgent need across society to make learning affordable, accessible and equitable – for all learners, at every stage of life. Meeting that mission made edX a global brand and a top destination for learners everywhere,” said 2U Co-Founder and CEO Christopher “Chip” Paucek.
STEP 7: 2U LAUNCHES $24K MBA & MPH WITH BOSTON UNIVERSITY UNDER “EDX” BRAND
“CEO Chip Paucek likens the upcoming changes to Alphabet (parent company) and Google (product company), but there is a major difference here. 2U is the company brand, and most customer- and partner-facing branding will be under edX. According to 2U in an email interview, the platform, marketplace and all 3,500 offerings will be under edX at closing, and the company expects that all of 2U’s partner facing programs and services will move under the edX brand as well, over time.”
SO WHAT HAPPENS TO THE LEGACY 2U PROGRAMS?
WHAT HAPPENS TO THE LEGACY HIGH COST TUITION MODEL?
HOW DOES 2U PLAN TO PAY THE LOANS BACK FOR EDX?
IS IT POSSIBLE THE 2U BRAND WAS PERMANENTLY DAMAGED FROM THE USC DEAL?
STEP 8: 2U Q1 EARNINGS REPORT
Results for First Quarter 2024 compared to First Quarter 2023
Revenue decreased 17% to $198.4 million
Degree Program Segment revenue decreased 21% to $111.5 million
Alternative Credential Segment revenue decreased 11% to $86.8 million
Net loss was $54.6 million, or $0.65 per share
WHOSE FOOTING THE BILL ON THIS STRATEGY CHANGE?
STEP 9: WHO QUALIFIES FOR BORROWER DEFENSE?
Under the law, you may be eligible for a borrower defense to repayment (borrower defense) discharge of the federal student loans you took out to attend a school if that school misled you, or engaged in other misconduct in violation of certain state laws.
Specifically, you may assert borrower defense by demonstrating that the school, through an act or omission, violated state law directly related to your federal student loan or to the educational services for which the loan was provided.
You may be eligible for borrower defense regardless of whether your school closed or you are otherwise eligible for loan discharge under other laws. You’ll only be eligible for this type of federal student loan discharge if your school’s misleading activities or other misconduct directly relate to the loan or to the educational services for which the loan was provided.
