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An EdTech Company Bought edX from Harvard and MIT for $800 Million. Its Stock Price Has Plummeted Since.

Massachusetts Hall is home to the University president's office.
Massachusetts Hall is home to the University president's office. By Julian J. Giordano
By Cara J. Chang and Isabella B. Cho, Crimson Staff Writers

When Harvard and MIT last year sold edX, the online course provider they jointly launched in 2012, the University’s top administrators said the change of hands would ensure the sustainability of the venture’s mission for years to come.

“It extends and improves the freely available open source platform that has become the foundation for innovations in technology-enabled teaching and learning among institutions and individuals, and it promises the advancement of new learning experiences and platforms,” Harvard President Lawrence S. Bacow and Provost Alan M. Garber ’76 said of the agreement in June 2021.

In its nine years under Harvard and MIT, edX — founded to make premiere college courses accessible to digital learners everywhere — grew to include more than 3,000 courses, with 39 million participants around the globe.

But in the period since the sale was announced, the education technology firm that bought edX for $800 million, 2U Inc., has seen the price of its shares plummet by more than 86 percent and cut 20 percent of its budgeted personnel costs.

The company says the cuts do not affect edX, which it is restructuring to center around. Anant Agarwal, an MIT professor who co-founded edX a decade ago and now serves as 2U’s chief platform officer, wrote in a statement that 2U is transitioning “to operate as one unified brand on one platform–edX.”

“This pivotal shift includes embracing one unified product and marketing strategy, a new model for our partners that builds on our shared mission, and a simplified organizational structure,” he wrote.

“Very few legacy edX employees were impacted” by the layoffs that are occurring amid the overall restructuring, according to Agarwal.

“As we shared on our last earnings call, operating as one powerful brand on one platform, the company will be able to pursue sustainable profitability, while building a stronger, more agile business that will drive the future of education,” Agarwal wrote.

At a July earnings call, 2U CEO and co-founder Chip Paucek said the company’s financial struggles were a reflection of “a strong job market and rising inflation” decreasing “organic demand in online education, particularly higher education,” according to EdScoop.

Agarwal maintains that “2U is in a strong financial position,” citing the company’s projection from July that it will make approximately $110 million in profits by the end of this fiscal year.

2U “made a legally binding commitment to preserve and advance edX’s founding mission” when it acquired the nonprofit, Agarwal wrote, including continuing the free track to audit courses, protecting data privacy for individual edX users, and safeguarding the intellectual property rights of faculty and schools.

The company’s competitors have also struggled over the past year. Coursera, which went public in spring 2021, has seen its stock price drop almost 71 percent since June 2021. Shares of Udacity, which is still a privately held startup, may have fallen as much as 50 percent, according to leaked secondary market data obtained by Insider.

Jefferson D. Pooley ’98, a professor of Media and Communication at Muhlenberg College, said the valuation of some online learning companies rose dramatically during the pandemic on the basis that they would prompt “transformative change” within education as a whole.

“Some of that momentum that indeed led 2U to provide $800 million [to buy edX] has sapped out at least of the market,” Pooley said. “These publicly traded companies — which 2U is one of — have seen their market shares decline pretty dramatically.”

Some of 2U’s critics say the flaws in edX’s model go beyond the firm’s recent financial struggles.

“edX was founded on a faulty premise that taped lectures from big name professors were somehow better than the direct attention of professors in every sphere of American higher education,” said Colorado State University-Pueblo History professor Jonathan Rees. “I think the fact that edX sold itself off to 2U is a sign that that premise was incorrect — and I believe that premise will remain incorrect.”

2U, which was founded in 2008 and went public in 2014, started as a company providing technical support for educational institutions to run online courses. Acquiring edX allowed 2U to scale up its own online class offerings, adding approximately 3,300 courses to its catalog.

Pooley said 2U purchased edX “primarily for the large user base that they could upsell and monetize.”

“The whole sale itself was a betrayal and a fundamentally misguided choice by Harvard and MIT to betray, in my view, the trust that faculty and students put into it when they signed onto the platform,” he said.

But Raymond Schroeder, a professor emeritus at the University of Illinois Springfield who serves as a senior fellow at the University Professional and Continuing Education Association, said edX’s shift away from its nonprofit status has not materially changed its offerings.

“It seems that edX is continuing to provide courses that are available, essentially free,” Schroeder said.

Since the acquisition, more than 5 million users have joined edX, according to Agarwal, who noted that the company has added many new course offerings.

Rees said that the dual incentives to maximize revenue and reach as many users as possible can dilute the time professors spend interacting directly with students.

“Scaling a good education will never work,” Rees said.

Correction: October 27, 2022:

A headline on a previous version of this article incorrectly labeled 2U a startup company.

Editor’s Note: This article has been updated to include an additional statement from 2U Chief Platform Officer Anant Agarwal.

—Staff writer Cara J. Chang can be reached at Follow her on Twitter @CaraChang20.

—Staff writer Isabella B. Cho can be reached at Follow her on Twitter @izbcho.

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