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Bridgepoint's Major Shareholder to Sell; Stock Down

Shares of Bridgepoint Education are down 11.61% to $26.96 near the end of the July 25 trading day.

The company's largest shareholder, Wall Street's Warburg Pincus, has put its entire stake -- 65% of outstanding shares -- up for sale. Warburg was one of the founders of the company in 2004. The stock has tripled since Warburg took it public in April 2009.

Bridgepoint is extremely controversial because, as I have stated many times, it is a boiler room. High-pressures salespeople get people to sign up for online education even though the people aren't suited for any college. Senator Tom Harkin repeatedly points out that 84% of two-year students at Bridgepont's Ashford University drop out, and 63% of four-year students quit. (Ashford accounts for almost all of Bridgepoint's business.)

You, the taxpayer, get stuck for the bill for this. Officially, the company gets 85% of its business from federal Pell grants and federal loans. But if military recruits are counted, it's more like 100%.

I predicted some time ago that Bridgepoint stock would go up, even though I found everything about the company ethically repugnant. That was because the Department of Education was threatening to put restrictions on Bridgepoint and similar for-profit schools. More than half of Bridgepoint's shares were short. That meant that if the government watered down the proposal -- as it did -- the shorts would cover and the stock would roar up.

That happened. Bridgepoint stock roughly doubled, but then backed down today. Warburg's decision to take its considerable profits may have interesting implications.

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In our search for new variations, we sometimes forget how good the originals are.

Shares of Bridgepoint Education are down 11.61% to $26.96 near the end of the July 25 trading day.

The company's largest shareholder, Wall Street's Warburg Pincus, has put its entire stake -- 65% of outstanding shares -- up for sale. Warburg was one of the founders of the company in 2004. The stock has tripled since Warburg took it public in April 2009.

Bridgepoint is extremely controversial because, as I have stated many times, it is a boiler room. High-pressures salespeople get people to sign up for online education even though the people aren't suited for any college. Senator Tom Harkin repeatedly points out that 84% of two-year students at Bridgepont's Ashford University drop out, and 63% of four-year students quit. (Ashford accounts for almost all of Bridgepoint's business.)

You, the taxpayer, get stuck for the bill for this. Officially, the company gets 85% of its business from federal Pell grants and federal loans. But if military recruits are counted, it's more like 100%.

I predicted some time ago that Bridgepoint stock would go up, even though I found everything about the company ethically repugnant. That was because the Department of Education was threatening to put restrictions on Bridgepoint and similar for-profit schools. More than half of Bridgepoint's shares were short. That meant that if the government watered down the proposal -- as it did -- the shorts would cover and the stock would roar up.

That happened. Bridgepoint stock roughly doubled, but then backed down today. Warburg's decision to take its considerable profits may have interesting implications.

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Comments
5

Is this the beginning of the end or the end of the beginning? Hah, hah. This is rather unusual, isn't it, for the firm that brought this along to just dump all its shares on the market at one time? Don't these firms usually slip away with a gradual sell-off? If this isn't a classic "pump and dump" manipulation, I don't know that one is.

July 25, 2011

Unfortunately, this is standard practice. A venture capitalist (in this case a Wall Street firm) puts in seed money, gets shares for pennies apiece, romances the stock and then bails out when it gets high. A lot of San Diegans got rich that way -- and there was no performance, no contribution to the economy, just a stock going up and the insiders bailing. Best, Don Bauder

July 25, 2011

And no prosecutions.

July 28, 2011

The cozeners have some of the best securities lawyers who make everything legal. It's the old story of following the letter of the law, not the spirit, and getting off. Best, Don Bauder

July 31, 2011

Not only that, but it's simple to set up biased testimony and get a mistrial. IF somebody screws up and it actually goes to trial. Then, there are the window-dressing and scapegoat trials to lead the hounds off the real scent.

July 31, 2011

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