Chegg Inc. (NYSE:CHGG) shares climbed 14% on Wednesday after activist investor Galloway Capital revealed a 5.44% ownership stake in the online education provider. The firm filed a 13D disclosing 6,093,000 shares and sent a letter dated April 8, 2026, to CEO Dan Rosensweig, arguing the stock trades far below its intrinsic value. Galloway Capital portrayed Chegg as financially healthy despite market perceptions of distress.
Undervaluation and Financial Strength
Galloway Capital highlighted a sharp disconnect between Chegg's current share price and its underlying worth. The investor emphasized the company's robust balance sheet, projecting net cash and zero debt by year-end. At roughly 0.5 times EBITDA after netting out cash, the valuation resembles that of a troubled asset rather than a established brand with significant scale.
Push for Better Investor Communication
The letter calls on management to enhance capital markets outreach and raise investor awareness. Galloway expressed backing for plans to split Chegg's business units, viewing it as a path to unlock value. Such separation could allow each segment to attract appropriate market multiples based on growth prospects and cash generation.
Spotlight on Skilling and Academic Services
Chegg's Skilling segment stands out with about $72 million in annualized revenue and double-digit growth potential in a $40 billion addressable market. Galloway Capital believes this high-growth unit merits a premium technology valuation if operated independently. Meanwhile, the legacy Academic Services business promises steady cash flow in coming years, a contribution overlooked in today's pricing.
Strategic Assets and Broader Outlook
The investor also pointed to Chegg's ongoing legal action over proprietary content as a source of potential strategic upside. In the edtech sector, where competition from free tools has pressured traditional players, activist involvement often signals turnaround potential through restructuring. Investors now watch for management's response, which could reshape Chegg's trajectory amid evolving online learning demands.