From a cursory assessment of learning technology firm Houghton Mifflin Harcourt — which previously traded on the Nasdaq exchange under the ticker symbol HMHC — you would’ve likely assumed the pandemic presented a viable upside catalyst for the company. With in-person lessons shuttered during the initial phase of the crisis, HMHC stock should have gained plenty of positive investor sentiment. Instead, it’s no longer — at least, as a publicly traded entity.
As our own William White pointed out earlier this month, Houghton Mifflin Harcourt completed its stock purchase agreement with private equity investment firm Veritas Capital. Due to a successful tender offer, affiliates of Veritas acquired HMHC stock for $21 per share, translating to an implied equity value of $2.8 billion. Several financial institutions provided Veritas with funding for the deal.
Ultimately, it’s difficult to view HMHC stock as a resounding success. According to historical data, shares were priced at $20.51 for the week of April 25, 2016. During the lows of the Covid-19 pandemic, they were trading hands at a few cents above $1. Finally, with the deal to go private, it essentially came back full circle.
One of the key lessons investors can learn from HMHC stock moving forward is that an intriguing narrative alone is hardly a guarantee of positive returns. Though e-learning platforms saw increased interest during the worst of the Covid-19 pandemic, evidence shows that some of the benefits were more theoretical in nature than actual. As well, there’s a case to be made that remote learning exacerbates inequities.
Most tellingly, the academia-based Global X Education ETF (NASDAQ:EDUT) has been an underperformer. On a year-to-date basis, EDUT is down more than 20%. Over the trailing year, it’s hemorrhaged 59%. While this isn’t to say online-learning investments are flawed, investors should always check under the hood before forking over their hard-earned dollars.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.