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Summary:

Textbook rental company Chegg has filed an S-1 with the SEC, indicating its intention to raise $150 million in an initial public offering.

Chegg Windows 8

Chegg, a Silicon Valley company that wants to be a digital one-stop shop for students, is on its way to an IPO.

On Wednesday, the Santa Clara, Calif-based company filed an S-1 form with the U.S. Securities and Exchange Commission, publicly announcing its intention to raise $150 million through a public offering.

The filing isn’t surprising – earlier this summer, Reuters reported that the company had selected J.P. Morgan Chase and Bank of America to lead the IPO. According to the company’s S-1, those two banks, along with Jefferies, will underwrite the public offering.  The filing also says that it plans to trade under the symbol “CHGG.”

Since launching as a textbook rental site in 2007, the site has expanded into a range of different digital services, aided by several acquisitions, including CourseRank, Zinch and Cramster. Now, in addition to its textbook rental service, it offers students homework help, academic social networking and course reviews, among other services.

In addition to filing an S-1, first reported by AllThingsD, the company said that it had added several new members to its board of directors, including Jeffrey Housenbold, president and CEO of Shutterfly; Marne Levine, vice president of global public policy, Facebook; Richard Sarnoff, senior advisor of Kohlberg Kravis Roberts & Co (KKR); and Jed York, CEO of the San Francisco 49ers.

Chegg’s move comes amid growing activity in education technology. Not only does it face competition from other companies offering textbook rental and digital textbook services, like Amazon, Apple, BookRenter, Kno and now Google, plenty of newer startups want to provide additional social and digital services to students.

Even though it likes to talk about itself as a “student hub,” the overwhelming majority of its revenue comes from its textbook business — and its print business at that. According to its S-1, in 2012, revenue from its print textbook business accounted for 87 percent of all revenues. Among the many risks listed in the S-1, Chegg acknowledges that the print textbook business is highly capital intensive, presents complex business planning and logistical challenges and that the transition to digital textbooks could lead to more competition and big changes in its business model.

Chegg also disclosed that it has experienced “significant net losses” since incorporating in 2005 (it launched two years later). In the first half of 2013, it generated net revenues of $116.9 million, up from $92.5 million for the year-ago period. It reported net losses of $31.9 million in the first six months of 2013, compared with a loss of $21.2 million in the same period of 2012. It also said that as it invests in new areas and tries to expand into new student services, it expects to incur additional expenses. Because of its investment philosophy, the company said, it does not “expect to be profitable in the near term.”

Considering that the education sector hasn’t seen an IPO in a while and that this would be the first public offering among a newer wave of ed tech companies, Chegg’s IPO will be closely watched. The company has raised $195 million from investors including Kleiner Perkins Caufield & Byers, Floodgate and GSV Capital.

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  1. If it’s not profitable right now and it’s not going to be profitable soon why are they IPOing? Why buy them?

  2. If it’s not profitable right now and it’s not going to be profitable soon why are they IPOing? Why buy them?

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