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Stock of Bridgepoint Education, the for-profit online university that appears more like a boiler room than an educational institution, zoomed once again today, soaring almost 12% to $22.89. As pointed out by Congress and the Department of Education, Bridgepoint uses high-pressure tactics to enroll students at its Ashford University. It gets almost all its revenue from federal loans and grants.

A huge percentage of its students drop out quickly. But since it doesn't have to give the money back, its revenues and profits growth is sizzling.

Motley Fool has been a big bull on the stock, noting that the company has $300 million in cash and no debt, and could be a takeover target (After all, a Wall Street firm owns 65% of its stock.)

Very importantly, more than half the positions in the stock in recent months have been short -- meaning speculators are betting the stock will fall. Shorts are likely to rush to cover their shorts, or buy the stock, if there is good news. And some think that is coming. In the next couple of weeks, the federal government is supposed to come up with a "gainful employment" rule that links a for-profit college's access to federal financial aid to students' ability to pay back loans.

Shorts have figured the rule will be punitive to Bridgepoint, which is being investigated by the Department of Education for bad recruitment practices. But others feel the rule will be watered down (Republicans have been pushing for that), and the shorts will rush to cover.

Today (May 25) at the famous Ira Sohn investment conference, a university student picked Bridgepoint as the best stock to buy. That student won first prize. Another analyst raised his rating on the stock.

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Comments

Twister May 25, 2011 @ 6:34 p.m.

Here's the plan: Figure out how to rig it so they get it in their shorts . . .

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Don Bauder May 25, 2011 @ 8:22 p.m.

That's the strategy of the shorts. They're falling short now. Best, Don Bauder

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Visduh May 25, 2011 @ 7:39 p.m.

We all would wonder just who would buy this stinking pile of c**p. What major corporation would want to take on this mess? Maybe no major corporation would, but what about these mysterious private equity groups? Such as Platinum?

This whole picture is most unpleasant, and whatever the outcome, the local employees of Bridgepoint are the most likely to suffer.

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Don Bauder May 25, 2011 @ 8:25 p.m.

Private equity groups could take it over. I don't know that another for-profit university such as Apollo would be interested. Bridgepoint is sitting on a lot of cash. The only thing in their way is justice -- administered by the Department of Education. But I think that DOE plan will be emasculated and the shorts will rush to cover. I could be wrong, of course. Best, Don Bauder

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SurfPuppy619 May 25, 2011 @ 9:42 p.m.

We all would wonder just who would buy this stinking pile of c**p. What major corporation would want to take on this mess? Maybe no major corporation would, but what about these mysterious private equity groups? Such as Platinum?

============= No one will buy them, no one in money management is that stupid.

Sallie Mae was trading at close to $70 a share when JC Flowers, a hedgefund, went under contract to buy them, then their stock went to $4 a share and that was the end of it-the student loan scams are front and center, and these diploma mill frauds operating 95% with fed student loan moneys know the jig is up. it is going to end, just a matter of when.

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Don Bauder May 26, 2011 @ 6 a.m.

I hope you are right -- that the for-profit diploma-mill remoras that feast off federal money while providing tenth-rate education will die out. But I am skeptical. Phonies like Jack Welch are pumping the for-profits. For ideological reasons, Republicans in Congress want to support these degree mills. The Obama administration wants to increase the numbers of college grads -- a stupid objective, but we have to deal with it. The Democrats wail that Republicans want to cut Pell grants, and it's misuse of such grants that keeps these mills thriving. Best, Don Bauder

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