Mike Arnold
Long only, small-cap, tech, growth at reasonable price

Should Rosetta Stone Be Taken Private?

The landscape for education software companies is heating up after private equity firm Hellman & Friedman purchased Renaissance Learning for $1.1 billion, a 130% premium to what another private equity player Permira Funds paid for Renaissance ($475 million) just 2.5 years earlier. In addition, Google Ventures purchased a minority equity stake in Renaissance just a few months prior to H&F coming along. It is expected that Google Ventures will buy back in alongside H&F at the higher valuation, indicating the growing value of education software in the technology ecosystem.

Given that backdrop, Rosetta Stone (NYSE:RST) is one of the cheapest and most misunderstood companies I can find in the market today.

RST data by YCharts

While it is...

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