(Update) For-profit college shares plunge; Capella down almost 20 percent

Here’s the updated piece from Bloomberg.

Capella University’s dive was a little larger than in the previous report: 19.71%.

Strayer Education Inc. led declines among for-profit colleges, with its shares falling the most in almost 11 years, after the company said government scrutiny of education companies discouraged students from enrolling.

The Arlington, Virginia-based company, which operates 87 campuses and an online university, fell as much as 26 percent in Nasdaq Stock Market composite trading. New student enrollment for the winter term that started last week declined about 20 percent from a year earlier and may slow earnings growth, the company said in a Jan. 7 statement.

“Negative publicity” over the last four or five months and distractions from government scrutiny of the company hurt enrollment, Chairman and Chief Executive Officer Robert Silberman said on a conference call today with investors. Barack Obama’s administration has proposed new regulation of the industry, and Senator Tom Harkin, the Iowa Democrat, has held hearings about for-profit colleges’ sales practices, government student-loan defaults, dropout rates and student-debt levels.

“You have to bear in mind the difficulty that students go through in terms of deciding to go back to school,” Silberman said. “There are always a lot of reasons not to do it. And negative publicity in the last four or five month certainly has had an impact.”

Falling Shares

Strayer shares fell $34.64, or 23 percent, to $118.60 at 4 p.m. New York time in Nasdaq composite trading. Pittsburgh-based Education Management Corp., the second-largest for-profit chain by enrollment, dropped $2.94, or 18 percent, to $13.68. Downers Grove, Illinois-based DeVry Inc. declined $4.74, or 10 percent, to $42.81. Phoenix-based Apollo Group Inc., parent of University of Phoenix, the largest chain, fell $2.04, or 5.4 percent, to $35.94. A Bloomberg index of 13 publicly traded for-profit college companies declined 11 percent.

Investors are selling shares across the industry because of concern about the impact of regulation and negative publicity, Trace Urdan, an analyst with Signal Hill Capital Group in San Francisco, said in a telephone interview. Apollo declined less than Strayer because investors had already sold shares after a similar announcement, Urdan said.

Strayer’s enrollment decline may reflect heightened price competition among for-profit colleges as Strayer increased tuition 5 percent this year, more than rivals, Urdan said.

Apollo on Oct. 14 said its new enrollments might decline 40 percent after it instituted a new orientation program that lets students sample classes before enrolling.

This piece is from Bloomberg, courtesy of our business news editor, Bill Caitlin.

According to other wire reports, Capella University of Minneapolis would tie for second place among those for-profit schools below that have suffered the heaviest losses — a share price drop of 17 percent.

Strayer Education Inc. led declines among for-profit colleges, with its shares falling the most in almost 11 years, after the company said government scrutiny of education companies discouraged students from enrolling.

The Arlington, Virginia-based company, which operates 87 campuses and an online university, fell as much as 26 percent in Nasdaq Stock Market composite trading. New student enrollment for the winter term that started last week declined about 20 percent from a year earlier and may slow earnings growth, the company said in a Jan. 7 statement.

“Negative publicity” over the last four or five months and distractions from government scrutiny of the company hurt enrollment, Chairman and Chief Executive Officer Robert Silberman said on a conference call today with investors. Barack Obama’s administration has proposed new regulation of the industry, and Senator Tom Harkin, the Iowa Democrat, has held hearings about for-profit colleges’ sales practices, government student-loan defaults, dropout rates and student-debt levels.

“You have to bear in mind the difficulty that students go through in terms of deciding to go back to school,” Silberman said. “There are always a lot of reasons not to do it. And negative publicity in the last four or five month certainly has had an impact.”

Strayer shares fell $35.09, or 23 percent, to $118.15 at 11:21 a.m. New York time. Pittsburgh-based Education Management Corp., the second-largest for-profit chain by enrollment, dropped $2.83, or 17 percent, to $13.79. Oakbrook Terrace, Illinois-based DeVry Inc. declined 15 percent to $40.52. Phoenix-based Apollo Group Inc., parent of University of Phoenix, the largest chain, fell 5.4 percent, to $35.94. A Bloomberg index of 13 publicly traded for-profit college companies declined 12 percent.

  • Kelleymrose

    I would love to know if American Career College is assciated with any other forprofit colleges other than Intercoast College, anyone know? I hope they put more regulations on these fraudulent so called colleges. I worked and went to school at Intercoast College in calif which has 11 locations in a couple states and I witnessed so many illegal things going on there. I BLEW THE WHISTLE…