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Private education companies like Corinthian, Apollo, and The Washington Post have been big-time targets of short-selling hedge fund managers, but they’re all up pretty nicely today.Why? Darrell Issa, the incoming head of the House Oversight Committee has announced his first investigation, and he’s looking into the GAO, which issued a damning report about the business practices of private universities earlier this year.
The Daily Caller has a good rundown of what’s up, but basically the GAO was forced to revise a very damning report on private universities after numerous errors were discovered.
The letter from Issa’s office notes:
“A bipartisan group of six lawmakers today released a letter sent to Acting U.S. Comptroller General Gene Dodaro seeking answers about controversial revisions to an August 2010 U.S. Government Accountability Office (GAO) report critical of recruiting practices at proprietary colleges and universities,” reads the email from Issa’s office. “The revisions to the GAO report were released on November 30, 2010, and included major changes to 16 of the 28 key investigative “scenarios” in the report. The factual changes to the report have raised new questions about conclusions reached by GAO regarding the recruiting practices of proprietary schools.”
Here’s an example of the type of error that was made
[One] section went from only reporting that a representative told an applicant that the school has graduates making $120,000 to $130,000 in a job that, according to the GAO, typically makes less than $70,000 a year, to reporting the representative also informed the applicant that she “could expect a job with a likely starting salaray of $13-14 per or $15 if the applicant was lucky.” $15 an hour translates into about $30,000 a year, and completely changes the tenor of the vignette.
All of these stocks have been clubbed this year. Apollo, for example, is down to $38 from a high of $66.
Leading the charge against these companies is Steve Eisman. Jim Chanos is another one who has bet successfully against them. On the other hand, a bunch of guys are also long names like Apollo. See more at MarketFolly for that.
More pressure builds over the finances of normal universities — see CNBC’s special last night — so combined with some friends in Congress, the tide could turn for for-profit schools.
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