Contributor, Benzinga
October 29, 2021
$10.35
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Like a star player standing helplessly on deck as the batter at the plate contends with a full count on the game’s last strike, the COVID-19 pandemic not only represented a global health threat but also a potentially paradigm-shifting event for both social norms and economic expectations. While the governmental response to the crisis was assertive and robust, the lost time from the disruption cannot be easily recovered.

A sometimes cruel sport, baseball requires each player to step up to the plate. Depending on the capriciousness of the game and how a pre-planned batting order stacks up to it, your best asset may be denied a chance to turn your team’s fortunes around. And that’s exactly what COVID-19 did to the academic year of 2020, arbitrarily stymieing the normal progress of intellectual progression for millions of students.

Unfortunately, nothing can turn back the clock. However, educational technology (EdTech) firm Udemy may offer one of the most relevant solutions of our time. Through its online education marketplace that offers user-generated courses, Udemy offers both students and working professionals a leg up in their academic pursuits and career trajectories. As a result, its upcoming initial public offering (IPO) has generated intense interest.

When is the Udemy IPO Date?

In a year that has already witnessed a deluge of fresh public listings — and with a fall season that’s poised to bring more to the table — 2021 is certainly the year of choices for retail investors. At the same time, competition is always a concern as enterprises compete for available dollars.

However, the key advantage for Udemy is pertinence, especially to the new normal that the COVID-19 pandemic catalyzed. The mass beta-test-turned-live that played out in employee’s homes largely worked well for employers. Similarly, despite challenges associated with learn-from-home initiatives, many teachers and professors praised the EdTech industry’s role in mitigating the severe disruption.

Therefore, Udemy is, unsurprisingly, one of the most popular names to hit the IPO calendar for the week beginning Oct. 25, 2021. Earlier on Oct. 5, Reuters reported that the company filed its regulatory paperwork regarding a public listing with the U.S. Securities and Exchange Commission (SEC). On Oct. 20, management disclosed the terms of the deal, which sees Udemy distributing 14.5 million shares at a price range between $27 and $29 per unit.

At the midpoint of the estimate spectrum, Udemy would raise $406 million, giving the company a fully diluted valuation of $4.3 billion. Prospective participants should note that Caledonia Investments (OTCMKTS: CALEF) intends to buy $75 million worth of Udemy stock, which accounts for 18% of the IPO. On Oct. 29, shares will trade on the Nasdaq exchange under the ticker symbol UDMY.

Morgan Stanley (NYSE: MS), JPMorgan Chase & Co. (NYSE: JPM), Citigroup Inc. (NYSE: C), Bank of America Corp. (NYSE: BAC), Jefferies Financial Group Inc. (NYSE: JEF) and Truist Financial Corp. (NYSE: TFC) represent the joint bookrunners for this IPO. With such a large backing from major investment banking powerhouses, you have some assurances — though no guarantees — of a hot opener for UDMY stock.

Nevertheless, you need to perform substantial due diligence before proceeding. While UDMY stock is a hot commodity in the IPO market, the sector itself is flush with new listings from earlier in the year. It then becomes a math problem, with only so many resources available for so many opportunities.

Udemy Financial History

Easily one of the most powerful trends during the pandemic-fueled lockdowns, remote learning really offered the only viable solution for those still wanting to pursue their education through the worst of the health crisis. Thus, it’s not terribly surprising that the global EdTech sector had a banner year in 2020, driving in revenue of $89.49 billion according to data from Grand View Research.

It’s also no shocker that many analysts and experts project tremendous growth for the EdTech industry worldwide. With a targeted compound annual growth rate (CAGR) of just under 20% from 2021 to 2028, the sector could generate total revenue of $377.9 billion. Given that the Udemy platform is so convenient, with instructors offering courses in relevant topics such as SQL and Java under a time-flexible schedule, UDMY stock could benefit from the underlying company taking significant market share.

However, industry fundamentals alone won’t mean much for Udemy if management fails to execute its strategic initiatives. Here, the financial picture provides a nuanced take, which prospective investors should consider carefully before enrolling in the opportunity.

Per the company’s Form S-1, Udemy posted revenue just below $430,000 for the year ending Dec. 31, 2020. As you might expect, the mad rush toward remote learning was a boon for the EdTech firm, with sales up nearly 56% against 2019’s tally of $276.3 million.

Even more encouraging, the momentum carried through into the first half of this year, despite the vaccination rollout thankfully crimping new COVID-19 infections. It turns out that pure cynicism is not the only fuel undergirding UDMY stock, with the company ringing up $250.6 million on the top line. This tally represented a sizable lift of 24.4% against the year-ago comparison.

Still, critics will note that UDMY stock is overvalued due to its presently unprofitable business. For instance, in 2020, Udemy incurred a net loss of $77.6 million, which was an unfavorable rise from the loss of $69.7 million posted in 2019.

At the same time, the dramatic rise in revenue has positioned Udemy to be eventually profitable. In the 6 months ending June 30, 2021, it incurred a net loss of $29.4 million, which pared the loss of $52.4 million in the prior-year comparison.

Udemy Potential

Adding to bullish sentiment that Udemy will eventually post income figures in the black is the strong potential supporting UDMY stock. For instance, while the COVID-19 pandemic severely disrupted students of all ages last year, the remote learning protocol that the crisis accelerated has been a lifesaver for students with disabilities, according to The New York Times. Many immunocompromised students prefer distance learning, boosting Udemy’s broader thesis.

In addition, UDMY stock features strong backing from multiple institutions. When the underlying company was a privately held enterprise, it pulled in a total of $311.4 million through 19 funding rounds. In addition to various private equity firms, Udemy enjoys support from Chinese internet firm Tencent Holdings ADR (OTCMKTS: TCEHY), which led a $50 million raise on Nov. 18, 2020.

Of course, no investment is without risk. For UDMY stock, the remote learning narrative isn’t completely positive. As an example, Third Way, a non-profit organization, conducted a survey of college students, which in part revealed concerns that “online education degrades the value of their degree. Over half (56 percent) are concerned that their degree is less valuable because it was online. Half (53 percent) also agree that higher education is not good quality now that it has moved partially or entirely online.”

In other words, it’s possible that most students prefer in-person instruction, which may mean that Udemy has a service evangelism challenge on its hands. Still, with digitalization rapidly becoming the norm everywhere, this obstacle might not be that large of a friction point.

How to Buy Udemy IPO (UDMY) Stock

As a retail buyer, you’ll most likely only be able to purchase UDMY stock at the open, which is the most straightforward process if you already know how to buy stocks. If you need a refresher, follow these steps.

Step 1: Pick a brokerage.

As most brokerages compete on similar financial incentives (i.e., commission-free trading), you should narrow your list of best brokers to platforms that provide robust access to alternative services.

Step 2: Decide how many shares you want.

Because an IPO is an adventure into multiple variables, it’s best to go with a balanced share count to mitigate downside risk.

Step 3: Choose your order type.

Before placing your order, understand these market concepts.

  • Bid: The buyer’s best offer for a stock.
  • Ask: The seller’s lowest acceptable price.
  • Spread: The difference between the bid-ask price, the spread indicates market risk as this is also the profit margin for market makers.
  • Limit order: Buy or sell requests at a predetermined price, limit orders provide transparency but no execution guarantees.
  • Market order: Market orders guarantee fulfillment but only at the current rate.
  • Stop-loss order: Stop-loss orders automatically exit your position at either a predetermined price or anything lower.
  • Stop-limit order: Stop-limit orders only leave positions at a specified price, but they also carry non-fulfillment risks.

Step 4: Execute your trade.

Follow these steps to execute a market order:

  1. Select your action type (buy or sell).
  2. Enter the shares you want to acquire (or sell).
  3. Hit the Buy (or Sell) button.

Follow the same sequence for limit orders (but include your execution price).

UDMY Restrictions for Retail Investors

Before participating in an IPO, review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons. Securities regulators will severely penalize anyone who illicitly advantages privileged information.

UDMY Pre-IPO

In traditional IPOs, underwriters of new issues distribute shares at their initial offering price to their choicest clients, almost always institutional investors. This pre-IPO process boxes out retail buyers. However, ClickIPO delivers democratization, affording this advantage to its members for select enterprises.

On-Demand Learning for the New Normal

While IPOs always carry significant risks, UDMY stock is particularly enticing, especially for those investors with a long time horizon. Increasingly, digitalization protocols are shifting the point of service to the home. It’s worked wonders for the streaming entertainment industry, which implies viability for the burgeoning EdTech market.

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