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An exploratory look at the edtech IPO market

by Jackson B
An exploratory look at the edtech IPO market

By Roger James Hamilton, Founder and CEO of Genius Group

So far this year there have been some big names who have chosen to IPO, including Bumble, Robinhood, Coursera and Roblox. This trend has been growing since the 2020 pandemic crash and then subsequently the markets have bounced back to levels similar to the dotcom boom resulting in companies raising more money through IPO than seen since 2007.

Many businesses are now looking for the liquidity offered by an IPO to fund business growth and there are a range of reasons why now is a good time. Driven by the pandemic there has been an increase in retail investors due to the accessibility of investing apps, the natural cycle of the markets and the digital layer that is now seen across all sectors.

IPOs are traditionally a major milestone for fast growing companies, and they are a great way to raise capital but there are many disadvantages, including being difficult, time consuming and expensive with founders needing to put together a full package for investors, engage underwriters and pay out huge fees. There is also the risk, if the opening price is wrong, founders can end up losing billions, as seen in the recent Deliveroo IPO.

Edtech has also seen a boom over the past 12 months with the pandemic pushing many to look for remote learning options. The pandemic has heightened this thirst for digital learning, but it has also brought into high definition that this transition to a new way of educating was actually much needed.

We have recently seen an edtech investment boom, with a record $16 billion of funding raised by 1,500 edtech companies during the pandemic. Education Research firm, HolonIQ predicts over one hundred-billion-dollar edtech companies will exist by 2025. This boom will naturally lead to more IPOs.

Disruptive technologies are all having an effect on the IPO market. Fintech, edtech, greentech and medtech are all trillion-dollar industries that are transforming the business landscape. All the key growth areas, like greentech and edtech, offer positive impacts on society as well as high returns and companies in these sectors can offer sound investment opportunities.

In March 2021 Roblox (RBLX), an online gaming platform that sits within the edtech space, went public via a direct listing and subsequently enjoyed a 54% first day increase on its offering. Roblox stock is an attractive proposition as it is expanding in western Europe and Asia and looks set to enjoy steady growth into mid-2022. The market value of Roblox is now just under $39.5 billion.

With a direct listing no new shares of the company are created but current investors can begin selling their existing shares based on demand when the trading period opens.

With over 37 million daily active users, Roblox is highlighting a trend that users are looking for unique and creative platforms to engage with. Roblox differs from other gaming platforms as developers can design and create their own games, offering that edtech element, and generate income from them via the digital currency ROBUX which can be exchanged for real cash.

Users and developers enjoy Roblox as it combines both a networking opportunity via the digital platform and also a range of immersive and interesting games, ranging from the simplistic to more complex and intriguing concepts. With a huge collection of games and extremely high daily active users, the Roblox stock is an attractive purchase and is likely to stay in the upward trend.

Another edtech company who took the IPO route this year is Coursera (COUR), an online education provider offering a range of courses and qualifications digitally. Coursera was priced at the high end when they went public on the 31st of March but still ended their first day up 36%. The company is aiming for a valuation of over $4 billion.

The pandemic has driven growth to the edtech market and Coursera, with such a huge range of courses, has been an attractive solution to adults and students that have wanted to top up their learning or diversify their skill set.

Over the past year Coursera’s registered users has grown to 76.6 million, a 41.5% increase. The platform also gains revenue from enterprise customers which have also increased over the past year with 240 in 2019 and 387 in 2020.

Coursera offers degree programs and works with universities to offer bachelor’s and master’s degrees with the plaftorm helping to drive uptake and charging a fee for this service.

As these three revenue streams grow, Coursera looks set to deliver healthy cashflow and indicates that the stock is at an early growth rate, so it looks like a great time to invest.

This buoyant IPO market looks set to continue this year with technology companies, who have experienced fast growth due to the pandemic, aiming for IPO. The trend of digital transformation, driven by the pandemic, has pushed companies to adopt modern technological solutions such as cloud-based technology and AI driven programming and this makes companies an even more attractive proposition.

The markets follow a natural cycle and with many start-ups having been injected with VC cash and seen considerable growth, they are now looking to IPO to generate cash for the founders and VCs that originally invested in them.

Over the past 12 months we have also seen the rise of the retail investor. A retail investor is an individual or non-professional investor who is investing for their own accounts as a side hustle or a hobby. The retail investor is more likely to engage in short selling as this has a higher potential return, but also has higher risks.

Platforms like Binance (bitcoin exchange) and eToro have allowed the retail investor the opportunity to glean market insight with notifications alerting the user as to when is a good time to buy and sell. This has enabled massive growth as trading has now become more accessible to all, with users only needing to prove their identification and address before being able to trade.

All of these factors have combined to make IPO a very attractive offering. Quick growth and a push for technology driven by the pandemic has seen exponential opportunity over the last 12 months, and this is trend is set to continue into 2022. Edtech is a standout sector utilising this way of raising capital and with demand increasing for edtech stock, watch this space for more edtech companies to IPO this year.

About the Author:

Roger James Hamilton is a world-renowned futurist, New York Times bestselling author and co-founder of Genius School. Genius School is the world’s first global, virtual school providing a full curriculum designed to nurture entrepreneurs, artists, changemakers and global citizens. Roger is also founder and CEO of Genius Group, the world’s no.1 entrepreneur education group. Genius Group is a multi-million-dollar group of companies leading the entrepreneur movement which includes the global edtech company GeniusU, education curriculum company Entrepreneurs Institute, and Entrepreneur Resorts Limited, the world’s leading group of entrepreneur resorts and co-working spaces. www.geniusgroup.net  | www.rogerjameshamilton.com

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