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San Diego's controversial Bridgepoint Education reported today (May 30) that its accounting for the year 2013 should no longer be trusted, as the company discovered "material weaknesses in internal control over financial reporting." It made the report in a filing to the Securities and Exchange Commission. The stock closed the day down 2.18% to $12.99.

What may have disturbed investors the most was that the company stated in its filing that its corrective process was hardly complete. Said Bridgepoint, "Although we plan to complete this remediation process as quickly as possible, we cannot at this time estimate how long it will take, and our measures may not prove to be successful in remediating these material weaknesses.... We have not completed all the corrective processes, procedures and related evaluation or remediation that we believe are necessary. As we continue to evaluate and work to remediate the material weaknesses, we may determine to implement measures to address the control deficiencies." Essentially that means the problems could go on well into the future, so investors may not be able to trust the company's financial reports for a long time.

Ironically, the restatement for 2013 resulted in higher profits — net income from $45 million to $48 million, as compared to $41 million previously reported. Earnings per share would be revised upward to 81 cents to 84 cents as compared to 74 cents previously reported, On the other hand, the revision writes down revenue from a range of $749 million to $753 million compared with the $768.8 million previously reported.

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Comments

Visduh May 31, 2014 @ 9:11 p.m.

We can only wonder why the management is engaged in this level of soul baring. And the candor, or what passes for candor, is especially surprising. Most of the time when a corporation does this sort of thing, it is tight lipped, and reveals as little as it can get away with. If I owned the stock, I'd be selling it right now, and not looking back.

Could this be the first indication that the house of cards that is Bridgepoint is coming down? If it is, I'd guess it will happen rapidly, maybe within weeks.

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Don Bauder June 1, 2014 @ 3:08 p.m.

Visduh: A U.S. senator has called Bridgepoint an absolute scam. I agree. But I don't think it is coming down soon. The restatement led to higher earnings but lower revenue. Most importantly, Bridgepoint admitted, in effect, that it may be some time before investors can trust the company's accounting. That's bad, but not enough to bring it down. Bridgepoint stock has few investors. It has gamblers, both on the long and short sides. That's similar to Herbalife. Best, Don Bauder

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Visduh June 2, 2014 @ 7:54 a.m.

The fact that Bridgepoint has no investors, only gamblers, tells me that it isn't going to endure. The "longs" on it are looking for a price run-up that will give them a quick profit. The shorts are betting it will fall further, maybe all the way down to nothing. Neither sees it as a long-term investment, and that means that smart investors are shunning it. There is a reason for that, and that is because it IS a scam for sure. That makes its stock behavior utterly unpredictable. One of the outcomes could be a full-on collapse in the near future, although that is not a likely outcome.

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Don Bauder June 2, 2014 @ 9:06 p.m.

Visduh: You certainly could be right. Its operating results have plunged. I would say the longs are waiting for the shorts to get scared and cover their shorts (buy the stock frenetically), driving it upward. The shorts are waiting for the company to collapse of the forces you mention. Best, Don Bauder

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