Thursday, November 13, 2014
Things aren't looking good for the publicly traded K12 Inc., which runs online charter schools in states around the country (Its Arizona Virtual Academy has more than 4,000 students). The schools are funded by taxpayer dollars, like all charter schools, so the corporation's profits and its CEO's $5 million salary come from taxpayer money it doesn't spend on its students' educations. K12 Inc.'s stock value has plummeted from $38 in September, 2013, to its current $12.60. The downward slide over the past few months has taken it into dangerous territory. Most stock analysts have revised their recommendations downward from Buy to Hold or Sell.
The notoriously poor education K12 Inc.'s schools provide isn't the issue, at least not directly. The problem is, the customer base hasn't grown sufficiently, stores are closing and new stores haven't opened as expected — I mean, the schools haven't picked up enough new students, some of K12 Inc.'s charters have severed ties with the corporation, and some states are balking at allowing schools to open. When you're running a for-profit school, students are customers and schools are stores, so it's really the same thing, which is the problem with for-profit education. (The best analysis of the problems with K12 Inc.'s education and its profit model comes from a wealthy hedge fund guy, Whitney Tilson.)
Can the corporation reverse its downhill slide? It's going to be tough. The brand is tarnished, and the stock market trend these days is up, not down. Unless investors think the stock has hit bottom and they can make a killing as it rises, things aren't looking good for K12 Inc.