Deep Dive into Nelnet (NNI)

Share cannibal; 51% insider ownership; trading at 1.2x BV

Ever wonder if a boring old student loan company could transform itself into a tech-savvy disruptor? Well, Nelnet (NNI) is doing exactly that, and hardly anyone seems to notice. This $4.1B company from Lincoln, Nebraska of all places has gone from chasing down student loan payments to building a serious tech empire. They even own a chunk of one of the hottest sports tech startups around.

While their competitors stuck to their old ways, Nelnet got creative. They took their decades of experience in education finance and built something bigger: a whole ecosystem of smart software tools that schools actually want to use. Then they did something even more interesting by placing bets on cutting-edge tech companies like Hudl (think Netflix for sports coaches) and ALLO (high-speed internet infrastructure).

So what you end up with is pretty fascinating. It's like finding out your reliable old Honda Civic is secretly packing a Tesla engine under the hood. One part of the business is still that steady loan servicing cash flow, but the other is pure tech growth potential. The best part? Wall Street still prices this thing like it's just another boring financial stock at 1.24x book value. Let's dig into why this weird mix of old school and new school might be one of the most interesting stories nobody's talking about.

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History

The origins of Nelnet paint a picture far removed from the technology-forward company we see today. In 1978, at a time when student loan servicing meant literally knocking on doors to collect payments, the foundations of what would become Nelnet were taking shape in Lincoln, Nebraska. The company's story begins with two pivotal figures (Mike Dunlap and Steve Butterfield) who cut their teeth in the gritty trenches of student loan collections, working for non-profit lenders in an era when student debt was still a relatively modest portion of the American financial landscape.

These early years provided crucial insights that would later shape Nelnet's approach to loan servicing. Dunlap and Butterfield witnessed firsthand the inefficiencies of manual collection processes and the challenges faced by both lenders and borrowers in the fragmented student loan market. This ground-level experience would prove invaluable as they began envisioning a more streamlined, systematic approach to education finance.

The 1980s saw the student loan industry undergo significant transformation with the establishment of the Federal Family Education Loan Program (FFELP). This program created new opportunities for private lenders to originate federal student loans with government guarantees, essentially laying the groundwork for what would become a massive market. During this period, the future Nelnet founders were building expertise and relationships within the industry, positioning themselves for what would come next.