Activist Galloway Capital Discloses Chegg Stake, Ignites 14% Rally
Chegg Inc. shares surged 14% on Wednesday after activist investor Galloway Capital revealed a 5.44% stake in the online education firm. The investor, holding 6,093,000 shares, sent a letter to CEO Dan Rosensweig arguing the stock trades far below its intrinsic value. This move highlights growing pressure on Chegg to address market misperceptions amid its pivot in the edtech sector.
Undervaluation Thesis Takes Center Stage
Galloway Capital's April 8, 2026, letter contends that Chegg's current price signals financial distress, despite a robust balance sheet projected to end the year with net cash and zero debt. The firm pegs the stock at roughly 0.5 times EBITDA, net of cash—a multiple more typical of troubled companies than one with Chegg's established brand and operations. Better communication with capital markets, Galloway argues, could bridge this gap and elevate investor awareness.
Support for Strategic Separation
The investor backs management's plan to divide Chegg's units, spotlighting the Skilling segment's $72 million in annualized revenue and double-digit growth potential in a $40 billion market. As a standalone entity, this high-growth arm could attract premium technology multiples, unlocking hidden value. Meanwhile, the legacy Academic Services business promises steady cash flow in coming years, overlooked in today's pricing.
Potential Catalysts and Edtech Outlook
Galloway also points to Chegg's legal efforts safeguarding proprietary content as a source of strategic worth. Activist involvement often accelerates corporate changes, from enhanced disclosure to restructurings that realize shareholder value. For Chegg, navigating edtech's competitive landscape—marked by shifting learner demands and technological disruption—this stake could signal a turnaround, drawing fresh scrutiny to its assets.
