Pale Fire Capital bets on Coursera despite falling stock

The investment group Pale Fire Capital, led by Jan Barta and Dušan Šenkypl, has raised its stake in the US education platform Coursera above ten percent, even though the company's shares have lost significant value since the start of the year. According to estimates, Czech investors have put roughly $167 million, or about 3.6 billion crowns, into Coursera since January.

Filings with the US Securities and Exchange Commission show that Pale Fire holds 28.8 million Coursera shares, close to 11 percent of the company. In just two days in September it bought a further $11.4 million worth of stock. The group is thus becoming one of the company's largest shareholders, even though the bet is currently underwater — the shares have fallen from more than seven dollars at the start of the year to under five dollars now.

Coursera is an entirely new position for Pale Fire's portfolio — as recently as last December the group held none at all. It has also been gradually buying shares in rival platform Udemy, which merged with Coursera this past May. Estimates suggest Pale Fire bought its Coursera shares at an average price of $5.80, meaning that at the current price of around $4.65 its paper loss stands at roughly $33 million, or about 700 million crowns.

Coursera reports 290 million learners, 18,000 corporate clients and nearly 95,000 instructors, with last year's combined revenue from the platform and Udemy topping $1.5 billion. The business is growing, yet stock-market investors have reacted nervously — after its latest quarterly results, which actually beat analysts' forecasts, the share price dropped 15 percent.

Notably, Barta and Šenkypl are buying in just as Coursera's and Udemy's longtime investors have been gradually pulling out. The Insight fund cut its stake from 10.6 to 3.4 percent, and other major players are retreating in similar fashion. Pale Fire, together with Coursera itself, which has launched a share buyback, is thus among the few net buyers.

For now, Pale Fire describes its role at Coursera as passive, with no effort to influence how the company is run. Elsewhere, though, the group is considerably more active — at companies such as Phreesia, Ziff Davis and Cars.com it has filed disclosures typical of investors seeking a say in how a company is managed. It has gone furthest at Groupon, where it took over operational leadership and where Dušan Šenkypl now serves as CEO. By his own account, Šenkypl would like to extend this model — actively influencing the management of the companies it invests in — to other holdings in the group's portfolio.