Shares of 2U, Inc. (NASDAQ:TWOU) declined Friday after the company announced that its board of directors appointed Paul Lalljie, the company's current Chief Financial Officer, to succeed Christopher Paucek as Chief Executive Officer. Matt Norden, the company's Chief Legal Officer, will assume the role of CFO.
The change was abrupt, but it was not a complete surprise, and it was likely the right path forward, said analysts.
“We are surprised by the announcement of Chip Paucek stepping down as CEO given his long tenure at 2U. However, given the meaningful deterioration in the Company's growth, heightened scrutiny on its [near-term] debt obligations, and continued decline in share price, we believe it is an appropriate and strategic decision by the Company to appoint Paul Lalljie as CEO as it increases its focus on operational efficiency and profitable growth,” said analysts at KeyBanc.
Analysts at Morgan Stanley also commented on the change, stating, “Though abrupt, we are not surprised by the changes in management given the company's ongoing challenges around both growth and profitability, particularly since its acquisition of edX.”
The analysts added, “We think the Board could look externally at some point to bring in new ideas and perspective to upper levels of management; however, with expectations for subdued growth and profitability over the next two years (our current model assumes a ~1% revenue CAGR, ~260 bps of EBITDA margin erosion FY23-FY25) and considering all of the risks 2U is facing, we believe it may be challenging to attract external talent at this time.”
2U, Inc’s shares have fallen by over 80% this year.
“The Board is confident that Paul is the right person to lead the company during this next phase, continuing to pursue our ongoing strategic initiatives and spearheading new ones,” said Paul Maeder, Chair of the Board of Directors of 2U.