Chegg Inc. (NYSE:CHGG) shares rose 14% on Wednesday following a disclosure from activist investor Galloway Capital, which revealed a 5.44% stake in the online education firm. The investor, holding 6,093,000 shares, sent a letter to CEO Dan Rosensweig on April 8, 2026, arguing the stock trades far below its intrinsic value. This move highlights investor frustration with Chegg's market perception amid its solid financial position.
Activist's Core Argument on Valuation
Galloway Capital contends that Chegg's current price signals financial distress, despite a strong balance sheet projected to show net cash and zero debt by year-end. The firm points to a trading multiple of roughly 0.5x EBITDA, net of cash, as inconsistent with the company's brand strength and scale. Better communication with capital markets could bridge this gap, according to the letter, fostering greater investor awareness of Chegg's true worth.
Potential in Business Separation
Management's plan to split Chegg's units earns Galloway's backing, with the Skilling segment spotlighted for its $72 million in annualized revenue and double-digit growth prospects in a $40 billion market. As a standalone entity, this technology-focused arm could attract higher valuation multiples typical of pure-play firms. Meanwhile, the legacy Academic Services business promises steady cash flow in coming years, value overlooked in today's pricing.
Strategic Assets and Market Outlook
The letter also flags Chegg's legal pursuit over proprietary content as a source of potential strategic upside. Activist involvement often catalyzes operational reviews and strategic shifts in undervalued tech firms like Chegg, which has navigated challenges in online learning. Investors now watch for enhanced disclosure and execution on the separation, moves that could redefine the company's trajectory in a competitive edtech landscape.
