Udemy's Proposed Sale Under Scrutiny Amid Subscription Transition

What happened

A law firm has launched an investigation into the adequacy of price and process in the proposed sale of Udemy, signaling potential shareholder concerns over fairness. This news emerges as Udemy, per recent filings, is shifting towards a subscription-first model, achieving 66% gross margin in Q3 2025 but grappling with soft Enterprise net dollar retention and Consumer transactional pressure. The investigation implies that the sale might not fully reflect the company's strategic pivot and improving financial metrics, such as positive adjusted EBITDA and a $50M buyback authorization. From the DeepValue report, Udemy's valuation at approximately 1x 2024 revenue and mixed balance sheet health add complexity to assessing the sale's appropriateness. Investors must now weigh the legal scrutiny against Udemy's operational progress, with the outcome likely to influence near-term stock performance and long-term value realization.

Implication

The scrutiny over the sale process could lead to delays or revised terms, creating near-term uncertainty and distracting from Udemy's subscription pivot. If the price is deemed inadequate, it might pressure for a higher offer but risks deal collapse, especially given the company's soft Enterprise expansion and Consumer traction. This event highlights governance risks, as a rushed sale may not capture Udemy's full value from margin improvements and market positioning. Investors should monitor the investigation's findings, as unfavorable outcomes could erode confidence and impact the stock negatively, while a fair sale could provide an exit catalyst. Ultimately, the implication hinges on balancing Udemy's operational challenges against potential acquisition premiums, requiring careful assessment of both financial and legal dimensions.

Thesis delta

The original 'HOLD' thesis, based on subscription traction and retention metrics, now faces added event risk from the proposed sale investigation, which could pressure the stock if issues arise. A favorable sale outcome might unlock value, but the uncertainty shifts the focus to governance and price adequacy, requiring investors to reassess based on sale clarity and alignment with strategic goals. This introduces a binary catalyst that could tilt the stance towards BUY if the sale is fair or SELL if concerns persist, beyond the operational watch items.