Law Firm Probes Udemy-Coursera Deal Amid Subscription Pivot Challenges

What happened

Udemy is advancing a subscription-first strategy that lifted Q3 2025 gross margin to 66%, yet faces operational softness with Enterprise net dollar retention at 93% and Consumer transactional pressure. The company has agreed to be acquired by Coursera in an all-stock transaction, offering Udemy shareholders 0.800 Coursera shares per Udemy share. Kahn Swick & Foti, a law firm, is investigating the adequacy of this price and the sale process, signaling potential shareholder concerns about fairness. This scrutiny emerges as Udemy works to reduce instructor revenue share and improve margins, while navigating headwinds in expansion and consumer conversion. Investors now confront a blend of ongoing operational execution risks and new merger-related uncertainties.

Implication

First, if the investigation uncovers inadequacies, the deal might be renegotiated or blocked, changing the expected outcome for Udemy investors. Second, the all-stock structure ties returns to Coursera's performance, which may not reflect Udemy's standalone value or growth trajectory. Third, the merger focus could distract management from critical operational priorities, such as boosting net dollar retention and consumer subscription traction. Fourth, investors must assess whether the exchange ratio fairly values Udemy's margin improvements and subscription pivot against its ongoing challenges. Finally, this adds event-driven risk that requires monitoring both the investigation's progress and Udemy's quarterly metrics to gauge investment viability.

Thesis delta

The investment thesis for Udemy now incorporates the proposed acquisition by Coursera, shifting from a pure operational hold based on subscription growth and margin expansion to one with merger execution risks. Previously centered on monitoring net dollar retention and consumer traction, investors must now evaluate if the offer price justifies Udemy's future potential or if standalone execution remains preferable. This introduces a scenario where legal and valuation uncertainties could override the fundamental improvements highlighted in the DeepValue report.