Thursday, July 9, 2015

K12 Inc.'s Dead Cat Bounce?

Posted By on Thu, Jul 9, 2015 at 9:00 AM

My knowledge of stock market terminology pretty much begins and ends with "bear market" and "bull market," but I only had to hear the term "dead cat bounce" once for it to stick in my metaphor-friendly ears. Here's the definition of the term: "A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend." It comes from the phrase—sensitive cat lovers, avert your eyes—"Even a dead cat will bounce if it falls from a great height."

K12 Inc.'s stock value has been following what looks like a classic dead cat bounce over the past year — a general decline punctuated by a few small upsurges. If that's what's going on, if it's heading toward oblivion, it couldn't happen to a more deserving for-profit, publicly traded education corporation, with the possible exception of the Apollo Education Group that runs the University of Phoenix, which has gone through a similarly deserved decline.

The similarities between the two for profits are revealing. Both make their money off taxpayers. K12 Inc. runs online charter schools in a number of states, including our Arizona Virtual Academy, so it gets state funding for every student it enrolls. University of Phoenix gets most of its money from student loans and grants from the Feds. Both need to continue growing to make a profit, so they use any means necessary to attract students. They depend on hard sell recruiting, where lying to students and their parents is an acceptable tactic. Both are far less concerned about the quality of education the students receive than the money they bring in. University of Phoenix is notorious for its poor instruction which is often valueless for the future employment the school promises. K12 Inc. schools tend to be among the lowest achieving schools in the state. Some of its schools have closed or are in danger of closing because they're below the states' required thresholds.

K12 Inc.'s stock may rise again, just like the University may, true to its namesake, rise like a Phoenix from the ashes. But the world of education would be better off if both continued on their downward trajectories and ended in oblivion, leaving wealthy stockholders with costly holes in their portfolios. No more students would fall victim to their shoddy economic and educational practices, and the wealthy backers of education privatization might realize that for profit education is as bad for their wallets as it is for the students it serves.

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