Teachers striking again over behaviour concerns

More than 50 staff at Tewkesbury Academy, part of the Cabot Learning Federation (CLF), have extended strike action citing abusive and disruptive behaviour by a cohort of roughly 70 pupils and failures by managers to address discipline; NASUWT and NEU members plan rolling strikes including 23-25 Feb, 4-6 Mar and 11-13 Mar if unresolved. The dispute follows a high-profile July 2023 incident in which a maths teacher was stabbed and the pupil received a 14-month detention, and presents operational disruption and reputational risk for the Trust while negotiations continue.

Analysis

Market structure: Localised strikes at Tewkesbury Academy are a micro shock that favors private tutoring/EdTech and security/facilities vendors at the margins. Practical winners: Chegg (Nasdaq: CHGG) and education services (Pearson, LSE: PSON) for alternate learning demand; security/facilities contractors (Mitie, LSE: MTO; Serco, LSE: SRP) for increased on‑site control. Losers are underfunded academy trusts and some outsourced operators (Capita, LSE: CPI) who may face higher operating costs and reputational hits; overall market pricing power shifts only a few percent in relevant submarkets over 6–12 months.

Risk assessment: Tail risks include escalation to regional/national strike action (low-medium probability ~5–15% over 3 months) or a high-profile safety incident prompting regulatory change and higher exclusions or central funding (high impact). Immediate (days) impact is attendance disruption; short term (weeks–months) is demand reallocation to private tutors/agency teachers; long term (quarters–years) could see policy funding shifts or permanent contract re‑allocations. Hidden dependencies: central government intervention, union bargaining outcomes, and pupil admission flows that can quickly reverse demand patterns.

Trade implications: Tactical allocations: establish modest long exposure to CHGG (3–5% portfolio) via 6‑month call spread (buy 25–30 delta, sell 45–50 delta) to capture pickup in tutoring demand; add 2–3% long PSON.L (6–12 month horizon) for assessment services. Buy 1–2% long MTO.L/SRP.L exposure for security/facilities upside; hedge by buying 3‑month put spread on CPI.L (short 2–3% notional) to protect versus contract renegotiation. Pair trade: long CHGG, short CPI.L sized 1:1 by notional for 3–6 months. Entry: scale in over 2–6 weeks; exit or trim on de‑escalation or 30% move against position.

Contrarian angles: Consensus underweights the stickiness of tutoring demand — even a 1–3% sustained uplift in private tutoring revenues across a region would justify current small-cap premiums in EdTech. Reaction is likely underdone for pure‑play tutoring (CHGG) and overdone for large outsourcers (CPI.L) if trusts are recapitalised; historical parallels (2018 US teacher strikes) show short-lived public disruption but lasting policy/budget shifts that benefit private supplemental providers. Unintended consequence: heavy-handed regulation or new funding could re‑centralise services, reversing wins for private contractors — use option structures to limit downside.

Key Decisions for Investors

• Establish a 3–5% tactical long position in Chegg (Nasdaq: CHGG) via a 6‑month bullish call spread (buy ~25–30 delta, sell ~45–50 delta) to capture potential 10–30% upside from increased private tutoring demand; size to risk budget and close or reassess at +30% or if strikes de‑escalate materially.
• Add 2–3% long exposure to Pearson (LSE: PSON) with a 6–12 month horizon to benefit from assessment/remote learning services; sell or trim if UK policy signals >£100m additional trust funding that would favour public providers.
• Allocate 1–2% to security/facilities contractors (Mitie MTO.L or Serco SRP.L) for contract upside; simultaneously buy a 3‑month put spread on Capita (CPI.L) sized 1–2% notional to hedge risk of outsourced contract margin compression if strikes widen.
• Implement a pair trade: long CHGG vs short CPI.L notionally 1:1 for 3–6 months (start scaling within 2 weeks). Exit or reduce shorts if strikes are contained within one trust or if government announces a near‑term sector bailout/recapitalisation.
• Monitor three triggers over the next 30–90 days: (A) strikes expanding to >5% of regional schools, (B) any new violent incident reported in national media, (C) government/Ofsted policy announcements on exclusions or funding. If any trigger fires, increase hedges (buy additional protection) and reweight positions within 48–72 hours.