Why shares of online education companies 2U and Chegg jumped today

What happened

After initially falling with the rest of the market this morning, shares of Chegg (NYSE: CHGG) and 2U (NASDAQ: TWO) both shot higher this afternoon. As of 3:30 p.m. ET, Chegg stock was up 3.5% and 2U was up 6.2%.

It’s a small respite for shareholders as the two online education companies are down 85% and 91% respectively from their all-time highs reached in early 2021.

Image source: Getty Images.

So what

The reason for today’s surge for Chegg and 2U has less to do with each company, and more to do with India’s leading education technology startup, Byju’s. The noise in the rumor mill this afternoon claims the company is in acquisition talks with Chegg and 2U as it considers a US takeover. An offer to buy one (or both) of the two companies is apparently in the works, according to a Bloomberg report.

Byju’s is a fast-growing company and was considering an initial public offering (IPO) in the United States, possibly via ad hoc acquisition companyend of 2021. The global tech bubble has run out of steam in recent months, however, which is the cause of pain for Chegg and 2U shareholders.

Now what

Byju’s is a big buyer company, so it makes sense that it would be interested in taking over Chegg or 2U for a breakthrough in the US education market. Just a week ago, a subsidiary of Byju, Great Learning, announced that it was buying Singapore-based Northwest Executive Education, which offers executive education programs in conjunction with universities such as Harvard University, Yale University, Massachusetts Institute of Technology and University of California, Berkeley.

The great relaxation of online and distance learning as the global economy gradually reopens from the pandemic shutdowns of 2020 and 2021 is a great opportunity for an industry leader like Byju’s. For newer Chegg and 2U shareholders, however, this could be little more than a consolation prize after the stock market crash. However, since his Initial Public Offering at the end of 2013, the Chegg share almost doubled in value. 2U, which went public in 2014, is down 25% at the time of this writing.

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Nicholas Rossolillo has no position in the stocks mentioned. The Motley Fool has positions and recommends 2U. The Motley Fool recommends Chegg. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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