Chegg (CHGG) Stock: Why The Price Increased

By Amit Chowdhry ● Nov 30, 2021
  • The stock price of Chegg Inc (NYSE: CHGG) increased by 2.84% in the most recent trading session. This is why it happened.

The stock price of Chegg Inc (NYSE: CHGG) increased by 2.84% in the most recent trading session. Investors are responding positively to a proposed accelerated share repurchase and an acquisition.

Proposed $300 Million Accelerated Share Repurchase

Chegg had announced that its board of directors authorized Chegg to enter into a proposed accelerated share repurchase (ASR) transaction to repurchase $300 million of Chegg’s common stock. And the company plans to enter into an ASR transaction with a financial institution during the fourth quarter of 2021, subject to market conditions.

The proposed ASR transaction will be effectuated pursuant to Chegg’s previously announced $1 billion securities repurchase program that was announced earlier this month. And as of September 30, 2021, $665.5 million remained available for future repurchases under this program. There is no expiration date for the repurchase program and it will continue until otherwise suspended, terminated or modified at any time for any reason by our board of directors.

Acquisition Of Busuu

Chegg also announced that it has entered into a definitive agreement to buy Busuu, one of the leading language learning platforms which has reached over 120 million learners to date across more than 160 countries. And Busuu provides courses in 12 different languages to over 500,000 paying subscribers.

Launched in 2008 by Bernhard Niesner and Adrian Hilti, with offices in London, UK, and Madrid, Spain, Busuu has established a vast and thriving community for language learning, with over 20,000 new registrations daily. Busuu is a content-rich education platform designed for those who are serious about learning a new language. Earlier this year, a study commissioned by Busuu, led by an academic at the University of Maryland, showed that users of Busuu will need on average 13 hours of study in a two-month period to move up one college semester (typically 90-105 hours of instruction). Busuu was also able to show significant improvements to spoken fluency for its learners. And the company offers free and paid subscriptions on a monthly, annual, and bi-annual basis.

Busuu is used by individuals across a broad age range, both in and out of formal education, and also provides corporate language training to hundreds of organizations. And its innovative approach combines self-paced courses developed by an in-house team of language experts with instant feedback from a global community of native speakers. Last year, Busuu added live language tutoring, offering live group lessons and one-to-one sessions with language teachers.

Chegg expects Busuu’s full year 2021 revenue to be about $45 million with year-over-year growth of greater than 20%. And the $17 billion digital language market is expected to triple in size in the next five years.

Chegg plans to acquire Busuu for approximately $436 million (€385 million) in an all-cash transaction subject to the terms and conditions of the definitive agreement. And the acquisition – which was approved by the boards of directors of Chegg and Busuu – is expected to close early in the first quarter of 2022, subject to customary closing conditions.

KEY QUOTES:

“The accelerated share repurchase demonstrates the strength of our balance sheet, and it reaffirms our confidence in the long-term opportunity for Chegg, as well as our continued commitment to enhancing shareholder value. Chegg believes there are robust growth opportunities, both organically and inorganically, to serve our existing customers and increase our TAM, so we can serve more learners around the world. We are firm believers in the future growth of online education and skills services globally and in Chegg’s position to support students on their path from learning to earning.”

“The addition of Busuu gives Chegg the unique opportunity to expand our business while also adding tremendous value to our existing users. It will allow us to drive further into international markets, as well as accelerate Busuu’s growth in the US market. Busuu’s team, who we have known for many years, are a great cultural fit. They have built an incredible learning service for the serious language learner, and we are excited to have them as part of Chegg.”

— Chegg CEO Dan Rosensweig

“Busuu has developed its own curriculum, regularly measures its efficacy, and has a community who support each other to reinforce learning. Like Chegg, they understand the value of on demand, self-paced courses, aimed directly at learner needs, and they have shown the ability to deliver at scale. We believe it is an excellent complement to Chegg Services, allowing us to add even more value to our users. It also will enhance our ability to serve users year-round, including adult lifelong learners.”

— Nathan Schultz, President of Learning Services at Chegg

“We are proud and excited to be joining the Chegg family, a world leading edtech company that puts students first. This partnership will give us an opportunity to leverage Chegg’s tremendous reach to fuel our expansion, particularly in the US. Our vision is to empower everyone in the world through languages, and we believe our relationship with Chegg will enable us to achieve this goal even faster.”

— Bernhard Niesner, CEO & Co-founder of Busuu

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.