Udemy’s stock price slipped on the first day of trading for the online learning platform

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Udemy, an 11-year-old online course platform, went public on Nasdaq today. Its shares, which opened at $ 29, fell 5% to $ 27.50 on the first day of trading, valuing the company at $ 3.7 billion.

Udemy is the subject of two Forbes Features in June 2020, hosting non-accredited courses taught by instructors who create their own pre-recorded content. The company shares the income from the courses, which cost an average of US $ 11, with the lecturers. Udemy used to give its teachers up to 50% of sales but recently reduced it to 37%.

Forbes described how a few hundred of Udemy’s 65,000 instructors made six-figure or multi-figure earnings. Some make up to $ 1 million a year.

The company’s backstory reads like a novel about immigrant success. Founder Eren Bali, 37, grew up in an impoverished Turkish village learning math online. He believed that great virtual teachers didn’t need fancy degrees. After his attempt to start an online learning startup in Turkey in 2007 failed, a dating site in Silicon Valley recruited him as an engineer.

He and two co-founders launched Udemy (the name is a play on “you” and “academy”) in San Francisco in 2010 after being turned down by more than 200 donors.

Pandemic bans have been a boon to online learning. Udemy filings skyrocketed, and in November investors pumped in $ 50 million, valuing the company at $ 3.25 billion. This brought the total capital invested to more than 300 million US dollars.

But when Udemy’s IPO filing was released in early October, it became clear that the company was never profitable. “We have a history of losses and may not be able to generate sufficient income to achieve or maintain profitability in the future,” states the “Risk Factors” section of the S-1 SEC filing. Despite the flood of customers signing up for sourdough bread baking and guitar lessons in 2020, annual losses soared to nearly $ 77 million in 2020. The company’s deficit: $ 408 million.

Last year, CEO Gregg Coccari told Forbes that Udemy would be profitable if it didn’t spend so much on expansion. But its filing suggests otherwise. Udemy spends $ 1.20 for every $ 1 of sales it logs.

“It’s like the Polish farmer’s joke,” says ed-tech investor Daniel Pianko, who passed on a Udemy stake years ago. “The farmer goes home to his wife and says, ‘I made nine zlotys from selling my wheat.’ The woman slaps him in the face and says: ‘The wheat cultivation cost us 10 zlotys.’ And the farmer says: ‘But I have sold a lot.’ “

Still, Pianko sees great promise in Udemy’s enterprise business. It sells annual subscriptions for $ 360 per employee. Popular courses include writing more effective business emails and communicating with a team.

This business is more profitable than the consumer department as the instructors see a lower drop in sales of only 25%. Subscription revenue also requires less marketing to keep it going. This business is growing rapidly, accounting for 30% of Udemy’s revenue of $ 430 million in 2020.

Udemy is also testing a consumer subscription model at a cost of $ 20 to $ 30 per month that gives customers unlimited access to 5,000 courses.

When CEO Coccari called a hotel in Times Square this afternoon, he sounded tired but relieved. “It’s nice to get to the finish line,” he said. About the falling share price, he said: “The IPO market is muddy. We are a long-term player. “

How long does it take for Udemy to make a profit? “We are not allowed to discuss something like this,” he said. “I don’t want to break the rules on the first day I’m a public company.”


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