The Massive Decline In Larger Education Company Market Caps

After our coverage of Blackboard’s CEO change last week, we were both interviewed by the Washington Business Journal, with the following lede:

Analysts and sources I spoke with Monday, both on and off the record, said the decision to bring on Bill Ballhaus as CEO was a combination of Bhatt failing to make progress building the company’s business and lacking the experience needed to successfully run a company of that scale. And that means at least several years before Providence Equity Partners, which owns a majority of the company after paying $1.64 billion for it in July 2011, begins actively marketing the company for sale, according to industry experts.

Earlier this week I wrote about Apollo Education Group, parent of the University of Phoenix, putting itself up for sale due to its weakening financial position. I also noted that I doubt that McGraw-Hill Education is going to be able to go public in the near-term. Part of the reason for this latter observation is the dramatic fall of Pearson in the stock market, triggered by its warnings that it would miss earnings estimates. In Audrey’s excellent year-end post on the business of ed tech, she noted:

Private equity firms sure love buying ed-tech companies. Perhaps because the stock market’s sorta “meh” about them.

Despite the talk of record investments in ed tech and digital content, the reality of the business of big education companies is not so robust. In fact, there is a massive decline in market caps for many of these large companies, as investors are seeing real weakness. The weakness can be felt in private equity acquisitions as well as public market valuations. To get a sense of the latter on how dramatic the decline has been in just the past year, I combined the market capitalization of four publicly-traded companies – Pearson, Wiley, Apollo Group, and BridgePoint (Ashford University) – over the past two years.

Composite Market Value

Admittedly, this is a somewhat arbitrary combination of companies based on public markets, but I wanted to get a broader sense of market valuation than just one company at a time. Just between these four companies, they have lost $13.5 billion in market value in the past 10 months, more than half of that drop from Pearson alone. To put this in perspective, the record private investment in learning technology, as described by Ambient this month, was less than half this amount for 2015.

Ambient 2015 Summary Table

At e-Literate we seldom talk about stock prices, as we are not focused on investments. But this aggregate view is worth considering to understand that all is not rosy for technology-based companies serving the education sector.

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About Phil Hill

Phil is a consultant and industry analyst covering the educational technology market primarily for higher education. He has written for e-Literate since Aug 2011. For a more complete biography, view his profile page.
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