Chegg, a publicly-traded provider of textbook rentals and online student services, has closed a $700 million convertible note offering that, after taking expenses into consideration, should give the company an additional $682.7 million in cash.
A portion of this sum will be used by the company for stock repurchases. Still, it expects to net $578 million “for working capital and other general corporate purposes, which may include acquisitions or other strategic transactions,” the company states. A Chegg spokesman declined to comment or share additional details.
An analyst note sent by BMO Capital Markets states that Chegg reported $468 million in cash and investments at the end of 2018, and that this latest cash infusion should give it a “sizable cash hoard” of more than $1.05 billion. The note says the company could share more details about its plans on its next earnings call, expected in late April or early May.
Morgan Stanley, BofA Merrill Lynch, Allen & Co. LLC, Barrington Research and Northland Capital Markets were initial purchasers of the Chegg notes.
Over this decade, several themes emerge in Chegg’s choice of acquisitions, many of which appear to support the company’s goal of reaching learners beyond college students, its initial target demographic, and to extend its sales cycle beyond early semester (when students usually buy or rent textbooks). Some of these purchases focus on providing instructional support, as evident through Chegg’s purchase of WriteLab (for $15 million), Imagine Easy ($42 million) and RefME ($1.8 million). Chegg also bought math software developer, Math 42 ($15 million.)
There are also a number of tutoring and study aid purchases, in the form of StudyBlue ($21 million), InstaEDU ($30 million), Cramster and Notehall (at least $3.7 million in equity). Chegg also acquired Internships.com (for $11 million) in 2014.
Jefferies, an investment bank, said in an analyst note that it “envision[s] a scenario in which [Chegg] goes beyond the 4-6 year college life-cycle and becomes a one-stop shop for all learning needs.” It believes the company could expand its offerings to serve careers, high school and international markets.
