Leading US online course provider 2U has warned of worsening financial problems, suggesting it may be heading towards bankruptcy just two years after its landmark purchase of industry leader edX.
Without 2U receiving some sort of financial bailout to reduce its debt levels, “there is significant doubt about its ability to continue as a going concern,” the company said in announcing its annual performance results.
2U is a private company founded in 2008 that creates online courses for universities. It bought most of edX — a resource for largely free online classes created by Harvard University and the Massachusetts Institute of Technology — in an attempt to convert some of its users into paying students.
But 2U bought edX for $800m (£640m) at the same time its basic model was struggling, as the universities it had hired to create online offerings were gaining confidence in building their own virtual classrooms. Major contracts lost included the University of Southern California, 2U's original partner.
Government pressures have also increased, as federal lawmakers and the Biden administration weigh demands from student advocates to limit or end the right of private companies to participate in tuition-sharing agreements.
In its new financial report, 2U described fourth-quarter and full-year revenue results as well below investor expectations, and declining enrollment at most of its operations. The company's stock is trading at about one-fifth of its level last November. This, combined with the company's blunt warning about its future, has left industry analysts suggesting that 2U has only a few options left.
“A structured bankruptcy is likely in 2024” unless 2U somehow gets “massive concessions” from its debt holders, said Phil Hill, a sector analyst.
Harvard and MIT used their payments from the sale of edX to create a nonprofit they now call Axim Collaborative, which plans to fund projects that benefit low-income and non-traditional students. Axim also keeps the remainder of the sales, called Open edX, which provides faculty around the world with an open source online learning management system.
paul.basken@timeshighereducation.com
