The watchdog group should study what happened to Bridgepoint stock. Short sellers can be a company’s best friend when they panic and cover their positions.
Cavalli, the bull on Bridgepoint stock, is realistic. “It’s risky, not for the faint of heart,” he says. Bridgepoint has been overaggressive in marketing to students who can’t succeed, he admits. But he thinks the stock can go to $35 or higher.
Opinions are mixed. On September 15, Sean Wright of the publication Seeking Alpha said Bridgepoint was “deeply undervalued” and shouldn’t be hurt by new regulations. But on January 16, David Sterman of the same publication said Bridgepoint was still a good short.
However, the Obama administration has definitely grown friendlier toward business and warier of regulation. Even though the Department of Education study roundly denounced the company’s practices, if there is a softening of regulations, more Bridgepoint shorts could soil their underdrawers and push the stock higher.