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Note to Shareholders and Investment Managers

For decades, public schools and businesses have worked together. Schools need the products and services private businesses provide—books, computers, whiteboards; heat, electricity, cleaning supplies; buses, gasoline and trash collection, among others. In many ways, America’s schools provide a good example of successful public/private partnerships. As you know, some companies have decided they want more than a partnership—they want larger profits that are not sustainable in the long term.
Pearson PLC is suffering a crisis of confidence precipitated by a confused business strategy and the company’s support for failed education policy. Pearson’s share trading price was approximately $20.68 at the last annual general membership meeting (held April 24, 2015). On Dec. 15, 2015, Pearson stock sold for roughly $10.70. This represents a price drop of more than 40 percent in only eight months. Numerous business analysts have openly questioned Pearson’s leadership and the steps the company has taken to address the drop in share price.

Even after Pearson announced a restructuring in early January, many in the business community are questioning Pearson’s effort to pursue a failed and unpopular business strategy. The Every Student Succeeds Act, the recently enacted national omnibus education law, could have a large impact on Pearson’s market:

  • Businesses that recently have enjoyed large profits from the huge demand for more standardized tests and test-preparation materials, test-based accountability for both schools and teachers, could see a dramatic drop in these markets.
  • States struggling to balance tight budgets will no longer be required to subscribe to expansive testing programs like Pearson’s PARRC.
  • States will be free to select more cost-effective assessments and support programs.
  • Those who are doing business with K-12 educational institutions in the United States are facing a rapidly changing landscape.
  • Previous business strategies that profited from a large federal role in high-stakes accountability and testing could become obsolete.

We are asking you as Pearson stockholders to ask the Pearson PLC board of directors to immediately conduct a thorough business strategy review of the company—including education commercialization and its support of high-stakes testing and low-fee private schools—and to report to shareholders within six months.

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