Buying or selling? Investors aren’t sold on Chegg just yet

13th November 2013 No Comments

stocks 2While the stock market is all about buying and selling, one of the new kids on the block is more focused on getting college students past those binary modes of consumption and into something a little more progressive.

That would be Chegg (CHGG), a textbook rental service that has gained ground as of late but failed to find a whole lot of it in its initial public offering.

A lot of that isn’t likely due to Chegg not being a good long-term investment. Instead, it has more to do with the puzzling decision to price the initial public offering above its offering range.

The initial public offering was priced at $12.50 per share, which did not hold up well at all. By the end of the day, shares had fallen 23% to $9.62. Clearly, that’s not enough information to call Chegg a long-term flop, but many were still questioning what in the world caused the initial public offering price to be so unreasonably high.

There is still a lot of optimism for the company in the long-term, though. Textbook rentals are increasingly becoming the go-to option for cash-strapped students, who are tired of buying books at exorbitant prices only to get a fraction of what they paid- if anything at all- when they sell them back at the end of the semester. Essentially, they are renting textbooks anyway using that system.

Chegg has positioned itself well within a growing market, and they have already applied technology such as their mobile apps to get a nice head start over their competition. While the time may not be now to invest, it’s a stock to keep your eye on, nonetheless.

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