Student Website Chegg Files for IPO to Raise Up to $150 Million
August 14, 2013
By John Kell
WALL STREET JOURNAL – Textbook-rental service Chegg Inc. has filed plans to raise $150 million in an initial public offering, while separately disclosing a co-founder of the company will step down from its board.
Chegg is planning to raise proceeds to obtain additional capital, as well as fully repay $21 million of outstanding borrowings under the company’s revolving credit facility, fund general corporate purposes and facilitate future access to the public equity markets.
Separately, Chegg disclosed that Aayush Phumbhra, the company’s co-founder while a student at Iowa State, will step down from the company’s board.
Chegg on Wednesday also announced the addition of four new board members, including Shutterfly Inc. President and Chief Executive Jeffrey Housenbold, Facebook Inc. executive Marne Levine, San Francisco 49ers Chief Executive Jed York, and Kohlberg Kravis Roberts senior advisor Richard Sarnoff.
With those additions, the company now has seven board of director members.
Founded in 2005, Chegg launched its first online print textbook rental business in 2007. The company’s business model is built around the view that outside of tuition, fees, and room and board, print textbooks are one of the most burdensome costs of higher education.
Chegg’s strategy is to thus purchase textbooks and rent them to students for an academic term at a substantial discount from the list price of the book. The company then earns a return on the investment of the book by renting it out over multiple academic terms.
For the six months ended June 2013, Chegg’s revenue jumped 26% to $116.9 million, and the company swung to a narrower loss of $21.2 million from a loss of $31.9 million in the prior-year period.
Chegg has about 180,000 unique titles in its print textbook library available for rent and offers more than 100,000 e-textbooks. In 2012, students completed 3.7 million transactions on the company’s platform, and it rented or sold over four million print textbooks and e-textbooks.
As Chegg continues to invest in the company’s business, it doesn’t expect to be profitable in the near term.
Chegg intends to apply to list the company’s common stock on the New York Stock Exchange under the symbol CHGG.