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Why Shares of 2U Jumped Today

By Lou Whiteman - Updated Jan 17, 2020 at 2:10PM

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Fresh reports suggest the company is considering its options.

What happened

Shares of 2U (TWOU -2.38%) spiked more than 14% on Friday morning following a report that the online education company has hired advisers to explore its options. The stock gave much of that gain back as the day went on, but it appears the company might be following through on a push by a hedge fund to find a buyer.

So what

2U jumped on Friday after Bloomberg reported that the company has been working with advisers to explore ways to improve performance, including a possible sale. The review is ongoing, according to the reports, and the company has not yet determined whether it will stay independent or do a deal.

A digital stock chart heading higher.

Image source: Getty Images.

The report comes three months after Bloomberg said that activist investor Sachem Head Capital Management had built a position in 2U with plans to push the company to explore strategic alternatives.

Shares of 2U have lost more than half their value in the past year, with the stock hit by an August announcement that the company was ratcheting down its near-term growth expectations in order to focus on operational efficiency in response to a flood of new competition in the business of facilitating online learning. The announcement caused investors to question whether 2U is a long-term growth stock.

Now what

Shares of 2U are down more than 30% from the company's IPO, and deal speculation for now at least is about the only thing that can get the stock moving in the right direction.

TWOU Chart

TWOU data by YCharts.

Although 2U is yet to confirm the Bloomberg report, I believe it is likely the company is exploring options and a buyout is possible. It is unlikely a deal would be done at a price approaching 2U's historic highs as a public company, and deal speculation is no reason to buy in, but for existing investors, it is worth holding on to see how the company's review plays out.

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