What Recession? ABS Capital Is Cashing In On Education

The education sector has been good to private equity this year, especially in the case of ABS Capital.

The firm is poised to earn at least 6x its money on its investment of Rosetta Stone Inc., a foreign language learning software business. Yesterday the company priced its IPO at $18 a share, well above its expected range of $15 to $17. Today, the shares opened at an impressive $23 a share, and as of 11:00 a.m. they had risen above $25.

So let’s break down what that means for ABS Capital’s investment. The firm purchased Rosetta Stone with Norwest Equity Partners in 2006 for $62 million. ABS Capital put down $29 million in equity. The firm sold 1.9 million shares in the IPO, which balanced out to $31 million in net proceeds, a source familiar with the situation said. With the stock at $25 per share, ABS Capital’s remaining stake is worth $141 million. That equals a 6x return. Not bad.

That’s on the heels the firm’s 17.1x its investment on the public offering of American Public Education, Inc. (Nasdaq: APEI). I plan to speak with Phil Clough at ABS later today to get more details on the firm’s education investments.

Meanwhile, Bridgepoint Education, a backed by Warburg Pincus, has seen its shares trade up since its IPO this week. The company’s debut was priced below expectations but rose 5.7% on its first day of trading. The company’s revenues rose 154% between 2007 and 2008, and profits increased eightfold. Warburg Pincus invested in the business in 2003 and still owns a majority stake. The firm sold 10 million shares.

Follow Rosetta Stone’s stock.

Follow Bridgepoint Education’s stock.

Previously:
ABS Capital Nears Close On Sixth Fund
How One Firm Warmed the Frozen Offering Market and Earned 17.1x In The Process
ABS Capital Partners Nearing Close On Sixth Fund
ABS Scores 17x Return on American Public Education