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Since the dawn of the internet, educators around the world sought to find the appropriate balance between digital innovations and the proven foundation of analog education. For instance, recognizing and understanding nonverbal communication plays an integral role in both development and contemporary business relationships.
Unfortunately, the COVID-19 pandemic forced many decisions out of educators’ hands, funneling all academic endeavors into the digital realm. Cynically, though, PowerSchool Holdings, a leading cloud-based software solutions provider for the K-12 education market, saw its stock rise both figuratively and literally. Given its relevance, PowerSchool’s stock offering (IPO) should generate much interest.
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PowerSchool Holdings IPO’d on July 28, 2021 at $18 per share.
As one of the early innovators in edtech solutions for the K-12 education market, PowerSchool initially sought to bridge the technological divide that prevented certain school districts from enjoying the benefits of the broader digital transformation. Through seamless embedding of software architecture in school workflows, both teachers and students can advantage the accretive nature of tech-driven learning while eliminating its risks, such as overdependence on a cold, standardized platform.
One of the distinguishing factors that bolster the case for the PowerSchool IPO is the underlying company’s holistic approach to advanced educational solutions. For instance, through its artificial intelligence and machine learning protocols, PowerSchool users can leverage predictive analytics to identify at-risk students, thereby delivering critical resources and intervention far quicker than traditional methodologies. Such innovations have contributed to PowerSchool representing the edtech needs of over 45 million students or over 70% of all K-12 students in the U.S. and Canada.
Most importantly for prospective buyers, PowerSchool’s incredible utility translates into encouraging financial performances. In 2020, the company generated revenue of $434.9 million, up 19% from 2019’s sales haul of $365 million. But it’s not just the headline numbers but the details behind them. For instance, every revenue subsegment — subscriptions and support, service and license and other — saw a conspicuous percentage increase year-over-year (YoY).
Notably, PowerSchool’s biggest revenue subsegment, subscriptions and support, enjoyed a 20% YoY increase to nearly $371 million. Logically, the COVID-19 crisis forced a wide-scale rethink about technology’s role in K-12 education, which invariably saw PowerSchool become a fortuitous beneficiary due to its strong market share position. Moving forward, bullish analysts anticipate that management can build off this baptism of fire.
On July 19, 2021 PowerSchool announced that it would begin a roadshow — a meeting with potential investors to attract attention for an upcoming public market debut — supporting its IPO. Having garnered the necessary interest, the educational technology (edtech) specialist has a launch date of July 28 on the IPO calendar. Shares will trade on the New York Stock Exchange (NYSE) under the ticker symbol “PWSC.”
From management’s filings with the Securities and Exchange Commission, PowerSchool will offer nearly 39.5 million shares of its Class A common stock. At the time of submitting its prospectus, the company expected its IPO to price between $18 and $20 per share. At the midpoint of this range, PowerSchool would raise approximately $750.5 million at a valuation of $3.7 billion.
But hours before the market opened on July 28, the edtech firm announced that its new issues will price at $18 per share, raising about $711 million. Roughly speaking, the adjusted figures should give PowerSchool a valuation of $3.5 billion. Subject to the satisfaction of customary closing conditions, the offering will likely close on July 30.
Based on its prospectus, the company “intends to use the net proceeds received from the IPO to repay outstanding indebtedness, pay expenses incurred in connection with the offering and other related organizational transactions and for general corporate purposes.” Also worth noting is that “PowerSchool will be making a $1 million donation to philanthropic initiatives to benefit K-12 educators.”
PWSC also debuted during a heavily competitive IPO day, where much-anticipated Robinhood Markets (NASDAQ: HOOD), Dole (NYSE: DOLE) and Duolingo (NASDAQ: DUOL) made their first public market entrances.
Although the pandemic and its resultant impact on society essentially afforded an organic marketing opportunity for various digital services providers, critics of edtech firms’ increased valuation argue that the public health crisis is a one-off. In other words, it may not be reasonable to expect companies like PowerSchool to perpetually generate double-digit growth metrics. While it’s unreasonable to completely dismiss this risk factor, investors should also consider wider trends in education.
Based on recent pre-COVID testing results from the Program for International Student Assessment (PISA), American students lagged behind their counterparts in East Asia and Europe in reading, math and science skills. Just as concerning, post-COVID data demonstrates that gaps within the American education system — that is, students of color and high-poverty communities — unfavorably widened. It’s important to stress that the coronavirus didn’t cause these gaps but rather exacerbated them.
To be sure, no easy answers exist for effectively addressing challenges in U.S. public education. Invariably, though, edtech will play a pivotal role in closing learning gaps both internationally and domestically. For the latter, PowerSchool’s risk identification protocol should lead to better student outcomes overall. Additionally, the company’s student readiness solution, which leverages predictive analytics to help prepare young people for higher education and the professional sector, will likely buttress economic performance over the long term.
Regarding the former, data from McKinsey & Company indicates that a growing number of western and East Asian countries are integrating edtech platforms in their K-12 equivalent curriculum. In order to stay relevant and competitive, the U.S. cannot afford to lag in edtech, boding well for PWSC stock.
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Webull is widely considered one of the best Robinhood alternatives.
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Moomoo is another great alternative for Robinhood. This is an outstanding trading platform if you want to dive deep into smart trading. It offers impressive trading tools and opportunities for both new and advanced traders, including advanced charting, pre and post-market trading, international trading, research and analysis tools, and most popular of all, free Level 2 quotes.
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Since risk management is crucial in the capital markets, you should carefully decide on your share count, which determines your risk-reward profile. Higher share counts open profitability potential but also exposes you to possibly greater volatility. Therefore, pick a balanced number that you’ll be comfortable with.
Take a moment to understand these market concepts before your first trade:
To execute a market order, follow these steps:
To execute limit orders, follow the same sequence but include your desired execution price.
Because of the trifecta of international competition, the domestic wealth gap and COVID-19, U.S. public education faces the greatest challenge of its history. To address next-generation concerns and promote better student outcomes, edtech solutions are absolutely vital, reinforcing the relevance of PowerSchool’s stock offering.
5 Stocks from Moomoo
5 Stocks from Webull
1 Stock from Robinhood
$150 from Axos Invest
$10 from eToro
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