2U, an online education platform listed on the NASDAQ under the ticker symbol TWOU, has filed for Chapter 11 bankruptcy. The company, based in Maryland, was burdened with $1 billion in debt and only had $125 million in cash by the end of the first quarter. As a result, TWOU stock is plummeting by about 70% in response to the news.
2U’s Profile and Bankruptcy Deal
2U specializes in collaborating with American colleges to offer online courses. However, in recent years, the company has faced stiff competition as many colleges have started offering online courses independently. This, coupled with students shying away from online courses due to rising tuition costs, led to a spike in 2U’s marketing expenses. Additionally, costly acquisitions and years of losses have weakened the company’s balance sheet.
As part of 2U’s deal with lenders holding the majority of its debt, the company’s debt will be reduced by 50%. The deal also includes $110 million in new capital and an extension of the maturity date for its loans.
What’s Next for 2U and TWOU Stock
2U aims to complete the bankruptcy process by September’s end and plans to continue business as usual. However, TWOU stock is expected to decline further, as stocks of bankrupt companies often become worthless. Following the Chapter 11 process, 2U anticipates becoming a private company, resulting in the delisting of its shares from stock exchanges.
Investors holding TWOU stock may receive minimal or no compensation for their shares. It’s crucial to understand the risks associated with investing in companies facing bankruptcy.
Overall, the bankruptcy filing by 2U will have significant implications for investors and the company’s future. It highlights the importance of conducting thorough research and understanding the financial health of companies before investing in their stocks.