Pale Fire becomes Coursera’s top shareholder, gets a poison pill

Venture investor Jan Barta, chief investment strategist of the hedge fund arm of the Czech group Pale Fire Capital, has raised the group’s stake in the American education platform Coursera to 14.7%, making Pale Fire the company’s largest shareholder. Coursera’s board responded with a defense against a hostile takeover: a “poison pill.”

Coursera offers online courses from leading universities around the world. In the spring, Barta explained the investment this way: “We think many white-collar workers will lose their jobs, and they will increasingly have to learn new things.” The shares were relatively cheap: they have fallen sharply since last summer. In addition, Coursera recently bought its main competitor Udemy, which Barta believes should bring an additional synergy effect.

The share price drop and new purchases

Coursera’s latest quarterly report, which for the first time included full data from Udemy, alarmed investors, above all with a weak business outlook. On Oct. 30, the shares plunged by a quarter in a single trading day, to $3.5 apiece, the lowest level since the company went public in 2021.

Pale Fire took advantage of the moment: the following week the group bought another 8.4 million shares for about $31.5 million, according to a filing with the U.S. Securities and Exchange Commission (SEC). The group now holds 37.2 million shares in total. According to another SEC document, 253.3 million Coursera shares were outstanding at the end of October, which gives the 14.67% stake.

What a “poison pill” is

The mechanism is simple: if one shareholder exceeds a certain percentage, the others gain the right to buy shares at a discount, and the large stake is diluted. Now, if any shareholder’s stake exceeds 15%, the others will be offered shares at a 50% discount. The offer does not apply to the investor who crossed the threshold.

Pale Fire is not named directly in Coursera’s new document, but it states plainly that the measure is a reaction to recent purchases by an investor holding about 14.7% of the company. It has been in effect since Nov. 7. In theory, Pale Fire can keep buying shares, but if that gave the others the right to discounted shares, its percentage stake and voting influence would only shrink.

A poison pill is usually used when a company faces a hostile takeover. However, public documents do not suggest that the Czech group is attempting one. In a filing at the end of September, Pale Fire itself stated that it is buying the shares not in order to change or influence control of Coursera. But, the publication stresses, that could change in the future.

By the Around Prague newsroom