IPO Spotlight: American Public Education

November 5, 2007 Associated Press

NEW YORK (AP) - The pace of initial public offerings picks up this week as 19 companies are expected to begin trading, and, according to analysts, there is no lack of potential stars in the mix.

Though the string of Chinese blockbusters is expected to continue, with three Chinese companies planning U.S. IPOs this week, one American company has garnered interest.

Charles Town, W. Va.-based American Public Education Inc. plans to raise about $68 million from its IPO of 4.7 million shares. The offering is expected to price between $15 and $17 per share.

The company is financially solid, and its position in the fast-growing segment of online education makes it attractive, said Melanie Hase, an analyst at Renaissance Capital's IPOHome.com.

"This is a company with very strong fundamentals," she said. "They are driven by strong enrollment growth as online education becomes more and more accepted in the market."

American Public Education provides online postsecondary education programs, which are regionally and nationally accredited, to the military and public service communities. The company serves roughly 25,000 part-time adult students throughout the United States and in more than 135 foreign countries. More than 80 percent of the students serve in the U.S. military, and many are eligible for tuition assistance through the Department of Defense.

"The Department of Defense is going to be very liberal with their funds," said Scott Sweet, the managing director of research firm IPO Boutique. "I like the growth there, not only because of the number of individuals it will likely serve, but the social responsibility the government is showing."

Sweet also suspects mutual funds that invest in socially responsible companies will be interested in American Public Education.

The online education market is rapidly growing. Eduventures LLC, an education consulting and research firm, estimates that by the end of 2008, the number of online students will total about 2.1 million. Based on projections for higher education enrollment by the National Center for Education Statistics, this equals about 12 percent of all students in degree-granting institutions by 2008.

And there are more than 2.1 million active and reserve military professionals in the U.S. Armed Forces, with about 300,000 new service members enlisted each year, according to the company's prospectus with the Securities and Exchange Commission.

For the six months ended June 30, American Public Education increased its earnings to $3.6 million, from $933,000 in the first half of 2006. During the same period, the company's revenue surged 78 percent to $30.3 million, from $17 million.

A comparable company is Minneapolis-based Capella Education Co., an online postsecondary education services company that went public in November 2006. The stock is currently trading at more than three times its initial offering price of $20.

One downside of the deal is that all the IPO proceeds will be used to pay a special distribution to stockholders, including members of the company's senior management, instead of into the business to finance growth, said Francis Gaskins, president of research company IPODesktop.com. But that shouldn't deter investor interest, said IPOHome's Hase.

American Public Education shares will trade under the symbol "APEI" on the Nasdaq.