Shares of Corinthian Colleges, Inc. COCO plunged more than 25% after the education company announced that it is closing down its remaining 28 ground campuses, effective Apr 27.
Earlier this month, the U.S. Department of Education (DoE) reportedly fined the company about $30 million for misrepresentation of job placement rates.
The transition plan was part of an operating agreement reached with the DoE last year, which limits the company’s use of federal student aid (Title IV funds) — the primary source of its revenues.
The shutdown leaves 16,000 students without a school to attend. Corinthian Colleges is working with other schools to accommodate these students so that they can continue their education.
The campuses closed include Corinthian’s 13 Everest and WyoTech campuses in California, Everest College Phoenix and Everest Online Tempe in Arizona, the Everest Institute in New York, and the 150-year-old Heald College.
Corinthian Colleges, since the last year, has been having a rough time with the DoE. Corinthian had allegedly falsified job placement rates and misplaced students’ attendance records at some of its schools, which led to the strict action by DoE. The information submitted by Corinthian to defend itself failed to satisfy the DoE. It sold many of its campuses and schools under pressure from DoE, which included a funding freeze and created a major cash crunch for Corinthian
Earlier, in Nov 2014, Corinthian Colleges entered into an agreement with Zenith Education Group, Inc., a subsidiary of ECMC Group, to sell 56 Everest and WyoTech campuses. In Feb 2015, the transaction was completed at all expect three campuses. These transactions allowed forty thousand students to complete their education.
Corinthian Colleges hold a Zacks Rank #3 (Hold).
Other Stocks to Consider
Some better-ranked stocks in the education industry include Career Education Corp. CECO, New Oriental Education & Technology Group Inc. EDU and TAL Education Group XRS. While Career Education sports a Zacks Rank #1 (Strong Buy), TAL Education and New Oriental Education & Technology hold a Zacks Rank #2 (Buy).
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