I’m not a stock analyst and I don’t invest in education stocks because of other work I do, but K12 Inc.’s stock dropping 23 percent yesterday on that NYT story seems like an overreaction. Sure there is an enthusiasm bubble around ed tech and online right now but K12 is established and has a diverse revenue stream and operations (think language programs with Middlebury, AP tools, etc…) and online learning is here to stay in some form. More likely the stock drop is either more fundamentally a reaction to speculation like this, concerns about pricing pressure that will emerge on K12 over time in the states as policies change, or it’s an overreaction to a news story that offered little new information for insiders who follow the issue. K12 (ticker LRN) is down again today and shortsellers seem to be having a field day. We saw this movie before on for-profit colleges and those stocks basically recovered as a class (to be clear – in terms of perception and seem to move more based on underlying valuation of individual companies today).
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Ahem (or maybe “burp” is the better term). The long-term question is not the stock price of K12 or short sellers for a single company but the potential for spillover in some future scandal to very large corporations that have a significant portion of effort in virtual education (which doesn’t exist yet).
I’m not sure “bubble” is the right term here, unless folks have been buying K12 (and similar) stock in a speculative fever.
Not sure how you can say the for-profit colleges have “basically recovered as a class.” Most of the for-profit college stocks are down more than 70% over the past couple years. I would argue the exact opposite: that the decline of the for-profit higher education industry (e.g., Career Education, Corinthian Colleges) and the for-profit charter school space (e.g., Edison Schools) were due in part to negative press coverage. Fair or not this coverage can impact consumer behavior and alter the regulatory environment. So, while yesterday’s NYT article may not contain any “new information” per se, the attention it gets can have more of an impact than the news it reported.
news story that offered little new information for insiders who follow the issue. Insiders who follow, ie, 1%
The lieutenant Governor of Massachusetts told me, a year ago, that there are no for-profit providers operating in our state. He’s able to maintain that because K12 inc and Mosaice Boston Turnaround maintain paper-thin non-profit fronts, behind which our tax moneys disappear. He’s not an “insider”, apparently.
The NYT story offers little new information for insiders, but it makes that information available to outsiders who vote. We vote not only for Lieutenant Governors but also for Attorneys General, who can launch investigations with the power of subpoena and depose you frauds and liars under oath to see some of the information that’s really only available to insiders.