Chegg Inc. (NYSE:CHGG) shares rose 14% on Wednesday after activist investor Galloway Capital disclosed a 5.44% stake and pressed management to enhance communication with investors. The firm, owning 6,093,000 shares, argued in an April 8, 2026 letter to CEO Dan Rosensweig that the stock price shows a sharp disconnect from the company's intrinsic value. This move highlights investor frustration with Chegg's market perception amid its shift toward growth segments in online education.

Strong Financial Position Overlooked

Galloway Capital emphasized Chegg's robust balance sheet, projecting net cash and zero debt by year-end. The investor contrasted this stability with the current valuation, trading at roughly 0.5x EBITDA after adjusting for cash—levels more typical of distressed companies than one with Chegg's established brand and operations. Such a discount ignores the steady cash generation expected from its core activities, signaling to markets a need for clearer financial storytelling.

Potential in Separating Business Units

The letter backed management's plan to divide Chegg's operations, focusing on the Skilling segment's $72 million in annualized revenue and double-digit growth prospects within a $40 billion market. As a standalone entity, this unit could attract higher multiples reserved for pure technology plays. Meanwhile, the legacy Academic Services business promises reliable cash flows in coming years, value currently absent from the share price and underscoring opportunities in edtech's evolving landscape.

Strategic Assets and Investor Demands

Galloway also pointed to Chegg's legal action over proprietary content as a source of untapped strategic worth. Beyond this, the firm demanded sharper capital markets engagement and greater investor awareness to realign the stock with fundamentals. Activist involvement often catalyzes operational reviews or restructurings in undervalued firms, positioning Chegg for potential re-rating if management responds decisively.