Shares of 2U (TWOU), an online educational platform, are trading 80% below the maximum levels of 2021. The company translates university training programs into an online format and then sells them to those interested, earning a commission for their participation. In other words, 2U is just an intermediary, not the creator of some unique product, as a result of which the initially increased attention of investors to TWOU looked strange. After all, the opportunities for scaling such a business are extremely limited. The situation worsened when a new report was published indicating a slowdown in growth, a decrease in the number of new students and large spending of cash on the background of growing debt.
2U is the case when an 80% drop is not a reason to rush shopping. The first thing to mention is the devastating WSJ article, which caused the strongest reputational damage to the company. The magazine wrote about students' complaints about misleading advertising: 2U sellers promised everyone that graduates would be able to easily find a job, which prompted enthusiasts to pay for extremely expensive tuition. According to a recent report, the number of new registrations for courses decreased by 1%, to 85.2 thousand, while the revenue growth rate decreased for the third quarter in a row. The FCF indicator turned out to be negative: - $77.1 million. According to the latest data, there was $233 million in cash on the balance sheet, and debt obligations exceeded $845 million. With such introductory new funding will be extremely difficult to attract.