Q&A With Rosetta Stone Investors on PE Education Plays (Hint: They Might Be Done For)
Following my post this morning on ABS Capital's partial exit of Rosetta Stone, I spoke with Phil Clough of ABS Capital. He said private equity activity in the education sector, which has proven to be wildly successful for his firm, is getting a bit overheated. It's a curious thing to say; Rosetta Stone's debut traded up more than 40% today, and Bridgepoint Education, another for-profit education company backed by Warburg Pincus, traded up in its debut this week as well. The pair of IPOs are the first PE-backed offerings of the year and mark the first time the markets have seen two IPOs in one week in 11 months. (For context, Thomson Reuters has published a chart showing there was an average of 3.9 IPOs per week in 2007.) And it's not ABS Capital's first success in the sector. The firm made a killing on its offerings of American Public Education, which it floated for 17.1x its money in December. Prior to that, the firm made 2x its money selling CourseAdvisor Inc. to Washington Post after owning it for only a year. And as I reported earlier, ABS Capital is poised to make 6x its money on Rosetta Stone based on a $25 per share stock price. Even so, Clough said finding another home-run education deal in this market wouldn't be as easy.
