NASDAQ: ZVO

Zovio Inc.

Company Overview

Zovio currently owns and manages Ashford University, a for profit university with about 35,000 registered students, mostly working adults. Zovio also operates a web development school (the Fullstack Academy) as well as an online tutoring service (TutorMe) matching tutors with students.

Zovio announced in early August that it would sell Ashford University to the University of Arizona who will rename the school the University of Arizona Global Campus. The new entity will receive meaningful services from Zovio and will pay Zovio for these services as well as provide Zovio with a substantial revenue share opportunity.

Key Points

  • Zovio is attempting to transform itself from a for profit school with significant regulatory burden into an education technology leader.
  • The announced transaction with the University of Arizona has the potential to create a win/win/win situation: a win for students, a win for the University of Arizona, and a win for Zovio.
  • The cloud over the stock is attributable to mixed industry reputation, adverse political interests, and occasional excessive regulatory demands. This has impacted operations and valuation over the last few years, but this cloud could be lifted with the completion of the proposed transaction, which could lead to improved operational results and a more positive investor outlook.
  • While renewed enrollment growth in the spun off non-profit university will be the key source of upside going forward, continued growth in the Fullstack Academy and TutorMe businesses, and potential service contract wins with other universities represent additional potential sources of upside.

Catalyst Monitor

  • Closing of the announced transaction with the University of Arizona and then positive enrollment growth facilitated by the enhanced reputation of the new owner of the online school.
  • Continued growth and partner announcements from Fullstack Academy and TutorMe.
  • New contracts for Zovio’s services with new university partners, which should be facilitated by the positive reputational halo effect created by the new relationship with the University of Arizona.