Linguistic Listing: Duolingo Files for IPO​


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By Rachel Strickland​


The Story

Kicking off the Q3 IPO season with a certain ‘je ne sais quoi’, language learning app and website Duolingo has filed to list on the NASDAQ. In its first adios from venture capital investment, Duolingo is looking at acquisition candidates to complement the company’s growth, and it also hopes to develop and launch a Duolingo certification that would be a widely accepted standard for language proficiency (CNBC).

Officially launched in 2012 during the boom of online education courses, Duolingo has grown rapidly - reaching ‘unicorn’ status (a private company with a valuation of $1 billion or over) at the end of 2019. After nine rounds of fundraising, Duolingo was valued at $2.4 billion in November 2020 (public.com).

Even with the rapid acceleration of remote learning over the past year, Duolingo is not yet profitable, with net losses of $13.5 million as of March this year (techcrunch.com). Built on the ethos of democratising education for all, Duolingo operates a ‘freemium model’ – where standard use is free but additional services are charged at a premium. This means that Duolingo currently relies on roughly 3% of premium subscribers and offering a paid ‘certification exam’ for revenue, alongside income from advertising (public.com).

What It Means For Businesses and Law Firms

Virtual learning is becoming increasingly popular, not least since the start of the pandemic. In 2009, competitor Rosetta Stone became the first publicly traded ‘stand-alone language instruction company’ (Reuters). In March this year, competitor Kahoot! moved from the smaller Euronext Growth market, to trading on the main list of Oslo Stock Exchange (Kahoot!). Considering Duolingo was valued at over 2.5 times the market capitalisation of Rosetta Stone in 2015, an IPO could further support the company’s continued growth as an ‘Edtech’ (technology designed to advance education) leader (cbinsights.com).

More broadly, after Chinese ride-hailing company DiDi’s IPO on the New York Stock Exchange last week, and Krispy Kreme’s NASDAQ debut – the US IPO market has seen its busiest week since 2004 (Renaissance Capital). In addition to a receptive market for companies, the US IPO market will be generating significant work for lawyers in preparing documentation, ensuring companies are regulation-compliant prior to listing, and advising on the onerous obligations of being a publicly traded company.

Duolingo has filed their prospectus with the Securities and Exchange Commission, and has enlisted Allen & Co. and Goldman Sachs as lead underwriters for the IPO (Markets Insider). Law firm Latham & Watkins are advising Duolingo on the IPO, having previously advised on a Series F funding round (subsequent venture capital investment for a start-up), while Skadden, Arps, Slate, Meagher & Flom will be advising the underwriters (Nasdaq).

Image Credit: Sulastri Sulastri / Shutterstock.com
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