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The Offer
Company Overview
Legacy Education operates a network of career-focused institutions, including High Desert Medical College (HDMC), Central Coast College (CCC), and Integrity College of Health (Integrity). These institutions offer diverse certificate and degree programs designed to provide practical training in healthcare, veterinary services, and medical information technology. HDMC, with campuses in Lancaster, Bakersfield, and Temecula, offers programs ranging from vocational nursing to ultrasound technician and plans to introduce an emergency medical technician (EMT) program by October 2024.
Key Highlights
Primary Offering:
Legacy Education issued 2,000,000 shares of common stock, with an option for underwriters to purchase up to an additional 300,000 shares within 30 days, generating net proceeds of approximately USD 10.28 million, or up to USD 11.95 million if the over-allotment option is fully exercised, based on an initial public offering price of USD 6.00 per share.
Use of proceeds:
The estimated net proceeds from the sale of 2,000,000 shares of common stock in this offering are expected to be approximately USD 10.28 million, or USD 11.95 million if the underwriters fully exercise their over-allotment option, based on an assumed public offering price of USD 6.00 per share (the midpoint of the price range) after deducting estimatesd underwriting discounts, commissions, and expenses. The company intends to utilize the proceeds for investments in its facilities, development of new programs, and general working capital purposes, with potential allocations for future acquisitions of complementary businesses or assets, although no such commitments exist at present. A USD 1.00 increase or decrease in the offering price would result in an approximate USD 1.86 million change in net proceeds, while an adjustment of 1,000,000 shares would alter the proceeds by USD 5.58 million, assuming no change in the price per share and after accounting for underwriting deductions.
Industry Overview
Market Opportunity and Strategic Focus
Dividend policy:
In 2023, LGCY distributed cash dividends on its capital stock; however, the company does not anticipate paying any cash dividends on common stock in the foreseeable future. LGCY intends to retain future earnings to fund ongoing operations and future capital requirements. Any future decision regarding the payment of cash dividends will be at the discretion of the board of directors and will depend on the company's financial condition, operating results, capital needs, and other factors deemed relevant by the board.
Financial Highlights (Results of Operations) (Expressed in USD)
Key Management Highlights
Risk Associated (High)
Investment in the IPO of “LGCY” is exposed to a variety of risks such as:
Regulatory Compliance Risks: LGCY faces significant risks related to its adherence to extensive educational regulations. Non-compliance with these regulations could lead to severe consequences such as financial penalties, restrictions on operational activities, loss of accreditation, or revocation of authorizations to operate educational programs. Such outcomes would not only incur financial costs but could also damage the company's reputation, leading to a potential loss of federal and state financial aid funding, which many students rely on to attend LGCY institutions.
Impact of Regulatory Changes: The regulatory landscape for educational institutions is subject to frequent changes and new interpretations, which pose a risk to LGCY’s operations. Alterations in laws, regulations, and standards could adversely affect the institution’s eligibility for Title IV funding and other financial aid programs. These changes might result in increased operational costs, restrictions on business activities, or legal sanctions. Such developments could materially impact LGCY’s financial stability and its ability to conduct business effectively.
State and Federal Legislation Risks: LGCY is also at risk from new or amended state and federal legislation that could impose additional compliance requirements or operational constraints. Changes in state laws, particularly those governing marketing practices, financial aid, and operational approvals, could lead to higher costs and challenges in maintaining necessary authorizations. Furthermore, legislative developments could affect student enrollment and revenue, potentially leading to adverse impacts on the company's overall financial performance and operational capacity.
Conclusion
Legacy Education Inc. (LGCY) is offering 2,000,000 shares of common stock, with a possible additional 300,000 shares through an over-allotment option, generating estimated net proceeds of approximately USD 10.28 million, or up to USD 11.95 million if the over-allotment is fully exercised. The company plans to use these funds for facility investments, program development, and general working capital, with potential allocations for future acquisitions. LGCY operates a network of career-focused institutions, including High Desert Medical College, Central Coast College, and Integrity College of Health, offering various healthcare and medical technology programs. The company has reported a revenue increase of 28.1% for the nine months ending March 31, 2024, driven by higher student enrollment, though operational costs have also risen. The IPO involves risks such as potential non-compliance with educational regulations, which could lead to financial penalties and loss of funding, and uncertainties from regulatory and legislative changes that may affect the company’s operations and financial stability.
Hence, given the financial performance of the company, use of proceeds, and associated risks “Legacy Education Inc. (LGCY)” IPO seems “Neutral" at the IPO price.
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