Shares of for-profit education company ITT Educational are crashing after the company disclosed that a real estate sale agreement fell through.
In afternoon trade on Monday, shares of ITT were down more than 30%.
On Friday evening, ITT said in a filing with the SEC that its agreement with College Portfolio Buyer to sell 24 parcels of real estate for $US119.1 million fell apart. The deal was first announced in May, and gave CPB the unconditional right to terminate the agreement at any point.
In the filing, ITT said CPB offered to extend the period under which it could’ve conducted due diligence on the properties, but ITT said this extension would have prevented it from entering other financing agreements on those properties in the interim.
According to FinViz, nearly 50% of the outstanding shares of ITT are currently being held short, or bet against by investors that the price of the stock will fall.
The for-profit education sector has long been one of the most skeptically viewed areas of the market, with a variety of investors and regulatory agencies criticising these colleges’ cost and the quality of the education they offer.
Last year, New York Comptroller Thomas DiNapoli released a report that was critical of industry oversight, saying that they leave, “too many young adults vulnerable to false promises.”
And earlier this year, noted investor Mark Cuban said he thinks the student loan bubble will collapse like housing bubble, causing colleges to go out of business.
Including today’s meltdown, shares of ITT are down more than 70% year-to-date, and over the last five years, the company’s stock price has fallen 90%.
Along with ITT’s tumble, shares of for-profit education peers including Education Management and American Public Education are down more than 2%.
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