Matthew Lickona 4 p.m., May 26
Bridgepoint Stock Soars. Will It Get Bought Out?
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.
More like this:
- How For-Profit College Lobbyists Bought Congress — Dec. 10, 2011
- Government Waters Down For-Profit College Regulations — June 2, 2011
- Bridgepoint Most Shorted U.S. Stock — April 5, 2011
- Bridgepoint: Bad for Students, Good for Gamblers? — Feb. 2, 2011
- Stocks of For-Profit Colleges Zoom on Rumors — July 19, 2010