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Wednesday, May 21, 2014

Investors May Not 'Understand' Chegg

Not long ago, Chegg’s business model of renting textbooks was disrupting the way students acquired course materials and how college stores did business. But times change and the company’s attempts to change with the times has left some investors scratching their heads.

In an effort to keep pace with the market, Chegg acquired the student platform Cramster, an online food-ordering service Campus Special, and Zinch, an online service that tries to match a student with a college. The purchase of Campus Special cost $17 million alone, and Chegg paid $2 million in expenses during the first quarter with no revenue and a sales cycle that doesn’t begin until July.

Since going public last fall, Chegg has watched its stock price tumble from the initial offering of $12.50 per share to less than $6. The company reported a net loss of $25.8 million in the first quarter of 2014, despite a 66% increase in digital revenue to $17.8 million.

"Everything we do is designed to solve the pain points students have,” said Chegg CEO Dan Rosensweig in an interview with BuzzFeed. But he did admit that investors “may not understand our business right now.”

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