Students are instructed via tablet to direct their attention to the teacher during an eighth grade … [+]
ASSOCIATED PRESS
Of everything the education marketplace is, it’s easy to forget that it’s actually a marketplace. There are, in fact, many public companies that make, sell or manage educational products or services, or even run schools directly.
Judging by stock value, those companies have not fared well lately. In fact, faring well may be too optimistic. Most have lost money over the past year and some, considerably so.
To illustrate, noted education technology writer and commentator Phil Hill put together this graphic along with a short twitter thread on the faltering fortunes of public education companies.
Education Technology companies, with only exception, have not done well in the market.
Mindwires, Phil Hill (CC License)
Of the nine public companies Hill charted, he wrote, “only Pearson has gone up in this group.”
That itself is highly ironic given that Pearson is something on the order of 178 years old as a company. It’s a book publisher. Or at least those are the company roots. That a company that old is the only one making valuation progress over the last year in the area of “education technology” should say a ton.
Hill continued, “Pearson up at 105% of March 31 value, LTG at 87%, Grand Canyon at 86%, Instructure at 70% (since their IPO), D2L at 55% (since their IPO), Coursera at 41%, 2U at 22%, Chegg at 20%, and Zovio at 17%. Brutal.”
Of course, counting Chegg as an “education” company is a stretch. So too for some of the others.
Nonetheless, dropping to 41% or 22% or 20% of your year-over-year valuation is indeed brutal, no matter what business you’re in. There’s just no other word for it.
When you see the value retreats of these companies together, a view of the market as a unit, the results are somewhat shocking. The pandemic was, after all, supposed to accelerate education technology and digital learning specifically. It was supposed to be the moment when these companies not only proved their value but richly rewarded their investors. Pandemic leaning was supposed to cement education technology not as a nice option but as the option. That’s what everyone said and most everyone expected.
So, to see this kind of regression under that glittery rainbow of expectation, it is brutal. Hill described it to me as, “the current bloodbath in EdTech valuations.”
Hill also suggested that, “for publicly-traded companies, there will be increased investor pressure to get finances in order to limit losses and avoid takeover offers. For earlier stage companies looking for investment, they may not succeed and may not survive. Less stability in EdTech markets overall.”
That feels right. But why the collapse? Why now?
On that, Hill said that the downward direction of education company stock may be part of a larger technology trend. “But,” Hill said, “clearly EdTech is its own driver, and there is a broad-based drop that investors are placing on the value of these companies. Part of what is happening is the investment community having a much more critical view on company forecasts and less wild-eyed models about company growth.”
Dahn Shaulis, who writes about education companies and dynamics at Higher Education Inquirer, has seen the same submerging trends and trendlines in the space and discussed them often. “The seeds of decline in the education business have been germinating for decades. It’s only now that people are seeing the toxic fruit. Disruption is not innovation, and it’s very often inhumane,” he said.
Inhumane is harsh. But there’s no denying that in this pudding, there’s very little proof that the promises of “democratizing education” or “savings through scale” or “unbundling” or “skills are the new degrees” – that any of it amounts to much. At least as far as investors have been concerned this past year.
It’s true that some of these education companies jetted upward when the pandemic first broke the horizon. So, their retreats aren’t collapses as much as they are returns to Earth. Still, an orbital reentry is not what most observers were told to expect and the bottom line of these bottom lines is impossible to overlook.
Maybe it’s a blip. Maybe it’s just part of a long or prolonged equity sell-off or just a technology one. Or maybe it’s something about education companies specifically – a challenge in the balance between education and business itself. The intersection of the Venn Diagram of education and business may, in fact, be incredibly small.
On that point, the timing was poetic last month when many of the leaders of these exact education companies – and others, whether public, private and aspirational – went to the annual GSV Summit. GSV is for “Global Silicon Valley” and it’s a conclave of education investors, education business types and a few pundits. If the education business community had a smoke-filled room, GSV is it.
At the Summit, a new executive at a one of the companies, a recent hire from the world of education, told an industry outlet that joining corporate education allowed him to bring the ideas of teaching and education to the people running these companies. “I’m in conversation with people who have never talked about pedagogy before,” the executive said.
If that’s true, it may be a problem that leaders of education companies have “never talked about” how their products actually work. Or if they do. That would be like someone saying the CEO of Ford never talked about driving. Investors would be right to be cautious. It appears they are.
