Dive Brief:
- Shareholders voted Tuesday to allow educational services provider Zovio to sell its assets and close, a coda for a company that tried unsuccessfully to pivot from operating Ashford University, a for-profit whose peak enrollment was about 80,000 students a decade ago.
- Zovio received enough votes in a brief special meeting of stockholders to approve plans it outlined in September to liquidate its assets and dissolve.
- Company leaders have estimated they will be left with as much as $20.3 million in cash to distribute to shareholders, although they warned that low-end estimates show nothing could be available after the company winds down. That means stockholders could receive as little as no payout or up to 54 cents per share.
Dive Insight:
Tuesday's shareholder vote marks the formal end of one company's attempt to pivot from a for-profit college operator into a contractor providing online colleges with educational services. It can also be seen as an example of the limitations of for-profit colleges converting into nonprofits in a time of increased regulatory scrutiny and falling enrollment across higher education.
Zovio was known as Bridgepoint Education until 2019, when it also acquired online tutoring services company TutorMe and coding boot camp provider Fullstack Academy. Then in 2020 it sold Ashford University, which had about 35,000 students at the time, to the University of Arizona.
The public university rebranded the institution as the University of Arizona Global Campus, or UAGC. It planned to buy services for its global campus, like marketing and recruiting, from its former owner Zovio under a 15-year contract that paid Zovio a share of the institution's revenue as compensation.
Other for-profit operators have successfully deployed such models. Most notably, Purdue University acquired the for-profit Kaplan University in 2017 and turned it into Purdue University Global, while keeping ties to the institution's former owner under a services agreement.
But it didn't pay off for Zovio. Enrollment sputtered at UAGC, and Zovio had to cut costs in 2021, according to documents it sent shareholders before Tuesday's vote.
"The UAGC Services Agreement remained a loss contract," the documents said. "The Company began to consider strategic alternatives to deliver value to stockholders, including the potential divestiture of its three businesses."
Company leaders decided to sell off or exit the remaining lines of business. They started with TutorMe, which sold for $55 million in May. Zovio used part of that money to repay a loan that it took out to pay for a California court judgment fining the company $22.4 million for misleading students who enrolled in Ashford University.
Then this summer, UAGC ended its contract with Zovio. The university took on an eight-year lease worth $20 million, hired nearly all educational services employees from the company and released Zovio from obligations. In return, the company paid UAGC $10.5 million and gave it rights to a $2.7 million security deposit.
Zovio estimates its remaining business, Fullstack, can fetch between $34 million and $55 million in a sale.
At the end of August, Zovio counted $63.2 million in assets, although almost a third of that was goodwill, or intangible assets like its brand name and reputation.
