Coursera aims to list its shares publicly within 12 months at a valuation of $3 billion, EducationInvestor Global can reveal, as the world’s largest ‘MOOC’ provider continues advanced discussions with bankers about the best route to market.

This publication has learnt that Coursera’s management team, led by chief executive Jeff Maggioncalda, is in “progressed” talks with bankers from Morgan Stanley about a flotation on the New York Stock Exchange.

A source familiar with the massive open online course provider’s strategy said that “very, very detailed” discussions with the investment banking behemoth are underway, with the ultimate aim being a stock market listing in the next six-to-12 months.

The valuation is based on a multiple of Coursera’s revenues because, despite having raised $315 million over the past seven years, the firm is loss-making, according to the International Finance Corporation (IFC). Forbes estimated that the organisation had revenues totalling $140 million in 2018.

The insider noted that Coursera has had “detailed” conversations with other New York-based banks, but favours Morgan Stanley because of its work on the $16 billion stock market debut of Palantir, a data-analysis provider, earlier this month.

Coursera, most recently valued at $2.5 billion in July when it raised $130 million, is weighing a range of mechanisms by which it could sell its shares publicly, the source said.

Routes to market under consideration include a traditional initial public offering and a direct listing, like that of Palantir, whereby existing shareholders sell their stakes to public investors. Also used by Slack and Spotify to go public, direct listings – unlike IPOs – do not raise additional capital.

“The Palantir deal”, on which Morgan Stanley was lead advisor, “illustrates the creativity of this particular bank that Coursera is keen on,” the source said.

A final accord is not guaranteed, and talks could yet fall apart.

When contacted by this publication, a spokesperson for Coursera said: “As a policy, we don’t comment on speculative news. We are busy building the business, including preparing for a major product announcement tomorrow. We have nothing more to comment at this time.”

A spokesperson for Morgan Stanley declined to comment.  

A listing of Coursera’s shares would come during a period in which the Covid-19 pandemic has upended university provision, with social distancing measures and on-campus outbreaks preventing in-person instruction at scores of institutions worldwide.

Meanwhile, the coronavirus crisis has turbo-charged growth of Coursera, which from mid-March to August added 18 million users to its platform – a more than 400% increase year-over-year.

According to IFC, which owns an equity stake in Coursera, the organisation has more than 58 million users worldwide – 17 million of which are in the US – and partnerships with over 170 higher education institutions in 50 countries.

A source told this publication that, after listing, Coursera “will move further into the skills space”, diversifying further from the core MOOC offering on which the business was built.

Coursera will leverage “its huge base of learners”, the source added, to whom short courses and micro-credentials developed by universities and corporates are marketed and sold by the firm for a fee. Coursera has already worked with several US institutions to create ‘master’s track certificates’ equivalent to about a third of a full master’s degree.

A New York listing would fulfil Coursera’s previously stated plans to float in the US, where it was founded in 2012, is headquartered, and its main competitors, Udacity and edX, remain under private ownership.  

At $3 billion, Coursera’s target valuation would dwarf that of its UK counterpart FutureLearn, 50% of which was bought for £50 million by SEEK Group last April, just weeks after the Australia-listed recruitment firm invested millions of dollars in Coursera. Other backers of Coursera, founded by Stanford University computer science professors Andrew Ng and Daphne Koller, include Learn Capital, GSV Capital, New Enterprise Associates and Kleiner Perkins.

In a prospectus, Coursera will sell to investors a story predicated on a widespread shift to online tuition slated to outlive the pandemic as universities diversify instruction methods to widen access to higher education.

But sceptics of Coursera and the MOOC model more generally will continue to question the efficacy of free and low-cost online university courses, for which completion rates are poor and have, despite much fanfare, failed to become the preferred tuition method among students.

What presents more financial promise, some say, is the prospect of Coursera becoming an online programme management (OPM) company, developing close ties to traditional universities by building and marketing their degrees, rather than producing challenger courses. However, Coursera has stated publicly in the past that it is not an OPM.

Despite this, Phil Hill, an ed tech analyst, has written in his blog that Coursera is one of the “MOOC providers that made the most aggressive moves into becoming OPM-type of companies, providing degrees”.

Hill and others have argued that Coursera could drive down student acquisition costs for university partners’ credentialled programmes, in turn reducing the overall price of degrees.

Micro-credentials and so-called sub-degrees present a larger opportunity for Coursera outside the US, where there is not a well-established framework recognising the value of diplomas and certificates, like there is in the UK and British Commonwealth countries, for instance.

According to IFC, Coursera offers more than 4,200 courses in 11 fields, along with two bachelor’s and 17 master’s degrees, 430 ‘specialisations’ (series of courses within specific fields), and a variety of certificates. Its courses are free to audit, but certificates, which demonstrate a passing grade, start at $39, while degrees start at $9,800.

Date published: 13 October 2020

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