Zovio shareholders approve plan to go out of business

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diving letter:

  • Shareholders on Tuesday voted to allow education services provider Zovio to sell its assets and close, a coda for a company that tried unsuccessfully to divest itself of operations at Ashford University, a for-profit university whose top enrollment a decade ago about 80,000 students.
  • Zovio received enough votes at a brief special meeting of shareholders to approve plans outlined in September to liquidate and dissolve its assets.
  • Company leaders have estimated they will have up to $20.3 million in cash left to distribute to shareholders, although they warned that low estimates show nothing could be available once the company winds up. That means shareholders could get as little as no payout, or as much as 54 cents per share.

Dive insight:

Tuesday’s shareholder vote marks the formal end of a company’s attempt to transform itself from a for-profit college operator into a contractor that provides online colleges with educational services. It can also be seen as an example of the limitations of converting for-profit colleges into non-profit organizations a time of increased regulatory control and declining enrollments in the entire higher education sector.

zovi became known as Bridgepoint Education until 2019, when it also acquired online tutoring services company TutorMe and Coding bootcamp provider Fullstack Academy. Then 2020 it sold Ashford Universitywhich had around 35,000 students at the time, to the University of Arizona.

The public university renamed the institution the University of Arizona Global Campus, or UAGC. It planned to buy services for its global campus, such as marketing and recruiting, from its previous owner Zovio under a 15-year deal that paid Zovio a share of the institution’s revenues in compensation.

Other for-profit operators have used such models successfully. Especially Purdue University acquired the for-profit Kaplan University in 2017, turning it into Purdue University Global while remaining affiliated with the institution’s former owner under a services agreement.

But it didn’t pay off for Zovio. Registration with UAGC stuttered, and Zovio needed to cut costs in 2021, according to documents it sent to shareholders ahead of Tuesday’s vote.

“The UAGC service contract remained a loss-making contract”, said the documents. “The company began considering strategic alternatives to provide shareholder value, including the potential divestment of its three businesses.”

The company management decided to sell or give up the remaining business areas. They started with TutorMe, which sold for $55 million in May. Zovio used some of that money to repay a loan it took out to pay off a California court judgment Fined the company $22.4 million for misleading students enrolled at Ashford University.

Then this summer UAGC terminated his contract with Zovi. The university secured an eight-year lease worth $20 million, hired nearly all of the company’s education staff, and relieved Zovio of its obligations. In exchange, the company paid UAGC $10.5 million and gave him rights to $2.7 million bail.

Zovio estimates that its remaining business, Fullstack, can fetch between $34 million and $55 million in a sale.

At the end of August, Zovio had $63.2 million in assets, although almost a third of that was goodwill or intangible assets like its brand name and reputation.

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