Business
Chegg market cap

Can Chegg turn its fortunes around?

William Coulman, David Crowther
6/18/24 11:49AM

Like a student who starts the homework the morning that it’s due, digital education company Chegg is trying to adapt in the face of AI, with its April-appointed CEO announcing yesterday a major restructuring plan. The strategy includes cutting its headcount by 23%, as well as an ambition to build a “platform that incorporates artificial intelligence verticalized for education”. Investors appear to like the plan, with the stock currently up around 15% on the news, but some might be thinking it’s too little too late.

Textbook troubles

Renowned for providing homework help, Chegg is seeking to reinvent itself as students increasingly turn to free AI tools like ChatGPT for assistance, a trend that’s compounded a brutal 3 years for the company.

During the pandemic the company’s online platform became a lifeline for many as schools shut down and students "chegged" their way through homework and online tests by paying to access Chegg’s wide database of millions of textbooks to get the answers. Revenues at the company doubled between 2018 and 2020, turning Chegg into a business worth some $15 billion at its peak.

But, like so many pandemic-era trends, once schools opened back up, Chegg found itself losing ground. Shares lost an eye-watering 49% of their value in a single day in 2021. That misery was made worse when execs announced that ChatGPT's popularity was impacting customer growth — and its fortunes never really reversed. Once proclaimed “the most valuable edtech company in America” by Forbes, Chegg has lost some 98% of its peak market cap.

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Paramount Skydance is preparing a majority cash bid for Warner Bros. Discovery, The Wall Street Journal reported, sending shares of both companies surging. The Journal’s sources say the deal is backed by the Ellison family, led by David Ellison.

WBD shares were up 30% on the report, while Paramount Skydance jumped 8%.

The offer would cover WBD’s entire business — cable networks, movie studios, the whole enchilada. That comes after WBD announced plans last year to split into two divisions: one for streaming and studios, the other for its traditional cable and TV assets. A recent Wells Fargo note gave WBD a price target hike, primarily because the analysts viewed it as a prime takeover candidate.

If the deal goes through, it would bring together HBO, CNN, DC Studios, and Warner Bros.’ film library with Paramount+, Nickelodeon, and MTV, all under one umbrella.

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If the deal goes through, it would bring together HBO, CNN, DC Studios, and Warner Bros.’ film library with Paramount+, Nickelodeon, and MTV, all under one umbrella.

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Fox and News Corp slide as investors digest $3.3 billion Murdoch succession settlement

Fox and News Corp shares dropped on Tuesday after Rupert Murdoch’s heirs agreed to a $3.3 billion settlement to resolve a long-running succession drama.

Under the deal, Prudence, Elisabeth, and James Murdoch will each receive about $1.1 billion, paid for in part by Fox selling 16.9 million Class B voting shares and News Corp selling 14.2 million shares. The stock sales will raise roughly $1.37 billion on behalf of the three heirs.

The new trust for Lachlan Murdoch will now control about 36.2% of Fox’s Class B shares and roughly 33.1% of News Corp’s stock, granting him uncontested voting authority over both companies for the next 25 years. Originally, the Murdoch trust was designed to hand over voting control of Fox and News Corp to Prudence, Elisabeth, Lachlan, and James after his death.

Investors are weighing the trade-off. Clear leadership under Lachlan may resolve conflict internally, but the share dilution, executed at a roughly 4.5% discount, means long-term investors now hold slightly less clout than before.

Both companies’ stocks were trading close to all-time highs prior to the announcement.

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