Meet Chegg's Investors
Meet Chegg's Investors
Plus, the NCAA sanctions another school for academic cheating. Plus, U.K.'s accounting police are on the case of exam cheating.
Issue 136
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Backing Chegg: Investors Seek Profit from Cheating
An outlet called DefenseWorld, which it seems is part of the family of investment publications of MarketBeat, ran an article this week noting some of the investment firms that had acquired stock in Chegg, the cheating provider.
It’s a helpful reminder that, because Chegg is a public company traded on the New York Stock Exchange, it’s powered by investors, people who put money into Chegg seeking profit. In Chegg’s case, these are investors seeking profit from cheating. Unfortunately, it’s easy to overlook their pivotal role in financing and fueling misconduct. They tend to cash the checks but avoid the scrutiny or scorn for their roles.
It’s true that Chegg’s investors have seen tough times recently as the stock has absolutely cratered, trading now at under $20, down from more than $110 (See Issue 115). Though to investors who may not know or may not care how Chegg makes money, a low stock price is an opportunity.
Whatever their reasons for throwing their money in with industrial cheating, here, according to DefenseWorld’s article, are some investors who’ve picked up Chegg stock recently or expanded their stakes.
Cerity Partners - a new $271,000 stake
Capital Research Global Investors - $130 million (yes, million)
Rubric Capital Management - $31 million
Assenagon Asset Management - $25 million
Clearline Capital - $18 million
Baillie Gifford & Co - $583 million (yes, million)
These aren’t all Chegg’s backers, just the ones in the article. Nonetheless, I think it worthwhile to put their names on the record.
Quickly, I find it implausible that these investment houses don’t know what Chegg is and what it really does. I can’t contemplate that anyone would invest half a billion dollars without understanding what Chegg sells and to whom. Moreover, Chegg’s cheating credentials are very public. They were quite literally the subject of a Forbes Magazine cover story last year. Ergo, if they know, they don’t care.
I also find it hard to believe that Chegg is a good investment, at any price. With regulations on the books in many foreign countries and more coming, investing in a cheating company seems risky at best, foolish at worst. But they’re the professional investors, I am not.
Finally, I did not check but I am still willing to bet that these companies all have ethics policies. Many of those probably include toss-away language about ethical investing. Just for the record.
NCAA Sanctions Another School for Academic Cheating
The NCAA, which oversees college athletics in the United States, has sanctioned Shaw University in North Carolina for academic cheating.
The details of the cheating are not abundant but it seems a coach paid or offered to pay a member of the woman’s basketball team to do academic work for members of the men’s team. The school did not contest the findings.
As a result of the cheating and other related violations, the school has been fined $3,500, the team will be on probation for four years during which it will be audited, some of its records and wins are forfeited, and many coaches and others face individual penalties.
The NCAA has done this before - see Issue 130 or Issue 125 or Issue 47.
What caught my eye this time is that the penalties from the NCAA for Shaw include:
Because this case involved academic misconduct, Shaw shall provide a copy of the infractions decision to its regional accrediting agency.
Interesting. That feels like the NCAA is asking for help in dealing with academic integrity issues - asking someone else do to something too, since their scope is limited to athletics.
To me, it raises questions about what accrediting agencies do with such notices. Do they care? Or does our collective concern about academic cheating only invoke action when it impacts college basketball games?
Just asking.
More Fallout from Cheating Among Accounting Firms
If you read The Cheat Sheet, you’ve likely noticed the recent bouts of cheating on licensing and certification tests at and among the world’s top accounting firms, including that recent $100 million fine for EY - see Issue 97, and Issue 131, and Issue 57 for examples.
You know who else noticed? The U.K.’s The Financial Reporting Council - which is, “The UK accounting watchdog.”
According to reporting in the Financial Times, the outfit:
has ordered the biggest audit firms to explain how they prevent staff cheating on professional exams after regulators clamped down on the practice following a series of scandals in the US, Canada and Australia.
I’m not saying that The Financial Reporting Council reads The Cheat Sheet. Although, hello.
The article continues:
The intervention followed recent fines for EY, PwC and KPMG over widespread exam cheating by staff in the US, Canada and Australia. Regulators uncovered examples of answer sharing by staff on internal assessments and tampering with the firms’ testing platforms to reduce the number of correct answers needed to pass.
And notes:
In a sign that cheating on professional exams extends beyond the accounting industry, this week the Financial Industry Regulatory Authority, a US regulator, announced it had barred two people from the securities industry for turning to online forums for help during tests.
Yup. We covered that too. In Issue 135.
Cheating on tests and assessments is by no means limited to college. It’s spread up and down academia and the professional ranks.
Note: Coming up, probably this Friday, a Special Edition of The Cheat Sheet. Get your popcorn. It’s - I can’t even.