The evolution of online jobs boards business SEEK Limited (ASX: SEK) is accelerating with news today that the group is to invest around $140 million for stakes in two different "high growth" global online education business.
It will spend $90 million to acquire a 50% stake in FutureLearn and another $50 million to acquire a "minority interest" in Coursera.
FutureLearn was reportedly founded by the UK's Open University and has 150 education and specialist institutions as partners alongside 9 million learners. Coursera is reportedly "the world's largest online education platform for higher learners with 40 million learners and 3,200 courses over 150 universities".
Post-privatisation the higher education or university sector is now a giant gravy train for affiliated and profit-hungry partners, with SEEK referencing its earlier success in investing in English language testing (IELTS) provider IDP Education Ltd (ASX: IEL) as a potential blueprint for its latest venture capital type investments.
For full disclosure I admitted to selling down some of my SEEK holding earlier in the year partly on valuation grounds, but also because to me it looks like management have concluded the route to growth is via heavy reinvestment in existing businesses and other venture capital style investments seen today. All this comes with a lot of risk and more importantly is already coming at the expense of actual profit growth.
As such investors are taking a leap of faith in a management team that admittedly has an outstanding track record, but I find it hard to get excited about SEEK's valuation today given its competitive position.
Another in the online classifieds space such as property focused REA Group Limited (ASX: REA) might be a better long-term bet as its competition seems much weaker.
