What's the endgame with the vultures and Cengage?
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Greetings,
Thank you for your inquiry. I am happy to share that Cengage has yet again met it guidance for the financial quarter. In addition to this, our share of digital-only sales has increased. This is more evidence that Cengage has evolved into a leading EdTech provider.
What Mr debt and equity and “nothing illegal etc.” said!
It’s why finance rules the world and we are all worse off because of it.
You want to see how to stay rich? Look no farther
Greetings,
Leveraging the balance sheet is most important, as are dividend payouts to equity holders. The best-case scenario is to pay as little of the debt as possible while dividends to equity holders are paid.
Also, Cengage repurchases shareholder stock and those shareholders make money when this happens. Many times these buybacks are financed with debt, not cash.
Debt can be leveraged and repackaged in many ways and is an important tool for private equity firms. In many cases very little real cash is used and the risk to PE is minimal.
I’m not insinuating in any way that Cengage is doing anything illegal, but if you look at the disclosures it’s easier to see how the company works.
I honestly have no idea. The company is not profitable and given both industry and higher ed trends, has little growth potential. So you can rule out the most obvious motivations for investing in the company.
Spin it off in an IPO? It's pretty hard to do an IPO when your balance sheet shows negative equity.
Merger with MGH or Pearson? This was the most likely scenario until the federal government stepped in and halted the proposed merger with MGH.
Your guess is as good as mine, but I guarantee Kermit and the private equity boys are up to some sort of financial engineering. Probably just more of the same - forcing the company to take out loans and then taking the cash off the balance sheet in the form of dividends. Once Cengage can't borrow another dollar they'll throw it back on the chapter 11 pile.
The mafia does the same thing to small businesses. Its called a bust out.