For Profit Schools Fighting Back: Will Eisman finally be investigated by the SEC?

I'm betting on it. They have artificially driven down the stock of BPI considerably and that of Apollo Group. If BPI gets to the $10 mark I'm buying everything I can. The problem is that it's hovering between $15 and $17 depending upon the day. If the HLC threatens to pull accreditation, however temporary, because BPI has servers in San Diego instead of Iowa, the stock will drop into the single digits (I'm speculating here) but BPI's fixed assets and high liquidity make them a solid for getting RA on the West Coast (something that has already begun). So if there's a gap between the two, I'm pouncing. Even now at $15 it would be a great deal, but I expect further drops since the price goes down every time Senator Harkin has a hearing...so I'm waiting.

As for Apollo Group, they are really too well established to take too much bigger of a hit (though they're down over 40%) in the future and I don't think their accrediting agency is subverting their attempts at growth the way Ashford University's is. I don't see Apollo dropping below $30 a share. I don't think they will slingshot back up like BPI will, again this is just my guess.

 

Look, let's drop the pretense that Bridgepoint Education is really just cute little Ashford University in Iowa with "servers in San Diego". No one is fooled anymore -- including HLC.

The following quotes about BPI's San Diego operations come directly from one of BPI's own press releases:

OK, there may be several hundred students and faculty at Ashford University in Clinton, Iowa. But there are now several thousand BPI stafff in San Diego, California -- making it one of the largest private employers in a major metro area. Apparently those "servers" need a lot of maintenance.

Even the President of Ashford University lives in San Diego. Maybe she helps with the servers too.

 

BPI does fund an NAIA college athletic program in Clinton.

But I would bet that they spend even more on college sports in San Diego.

 

Right, but you're giving stats on BPI who owns Ashford, they also own the University of the Rockies...you're not making a distinction. Ashford itself is an entity in Iowa, the physical school, etc. The servers of the parent company, the HQ and I assume anyone providing business services (likely) to include enrollment and advisement are located in San Diego. But these are not necassarily all academic services but support and business services. Let's assume for the moment that the HLC is simply acting in the best interests of higher education, they (the HLC) create a rule that basically says you have to have a significant presence within their geographic area where they provide accreditation. They don't get to detailed into what is meant by their term "significant presence" but I get the feeling that they probably mean the bulk of the school's services. Again I didn't see a 51% rule or anything of the like so it's all a little vague. It's somewhat of an after thought and may be outdated the minute schools figure out they can offer online, scalable course offerings with little investment up front and infinite scalability. How? They begin outsourcing IT infrastructure and hiring adjuncts as needed.

So what happens if BPI decides to outsource? What if they ditch localized servers and server farms and go out the the cloud? It seems logical since they are already driving innovation using decentralized services, something not uncommon in business but apparantly unheard of in education. So what happens if others follow their lead? What happens if other schools go to the cloud to host online services? Does the service provider have to be within a certain area? Would you then move accreditation to wherever Amazon holds their server farms and all included persons? Is it enough to keep your core business services localized? What if they outsource those? What if they outsource admissions people? Won't happen? What about what the e-certificate guys like eCornell are doing? Or the University Alliance folks selling external and contracted educational services for name brand schools like Notre Dame.

What I'm saying is that this is not a black and white argument, the HLC isn't just waking up to a wrong that's been going on under their noses but they ARE getting pressure from the U.S. Senate and the U.S. Department of Education which is wrong, accrediting bodies are supposed to be autonomous by design. Instead we are seeing hedge fund investors pulling political strings to destabilize a market segment in order to turn a profit. Unfortunately there are plenty of people still fooled on this one but they're coming around and in this case it's the SEC that's waking up.

Of the two sides of the argument, it appears only one is actually breaking the law.

 

Again, you're rolling the parent company and the college into one. So what happens if BPI opens a school in Texas? Your concern is centered around where they spend their money? Have you been to Clinton, Iowa? I have, let me tell you something, what that school has done for that little town in the way of jobs and the influx of money is astounding. Without Ashford Clinton would be one of the 10 other nameless, faceless towns along the river that I drove through during my stay. Ashford has a significant economic presence there.

 

That's because the distinction is trivial.

Ashford University had more than 76,000 students at the end of 2010.

According to the USDoE's "College Navigator" website, enrollment at University of the Rockies was 842. That number may be a bit out of date, but it is still insignificant relative to Ashford.

Seems like it must be an awful lot of services, if it takes 5,000 employees and 600,000 square feet of office space. Let's be realistic, this dwarfs the operations in Clinton.

It's not unheard of at all. Unaccredited institutions -- like MUST University -- have been making this argument for years. These schools claim to be "virtual" institutions, with no fixed physical addresses; therefore they are not subject to old-fashioned licensing or accreditation rules, which have not kept up with the advances in technology.

Years ago, the degreeinfo board was full of debate about the validity (or lack thereof) of unaccredited schools. But the unaccredited schools (like Kennedy-Western, Clayton, Knightsbridge, etc.) have increasingly faded out of the picture. The debate now is more likely to be about the validity of for-profit accredited schools. It's interesting to watch advocates for for-profit schools rediscover the same old arguments.

 

And if, in the future, Ashford does achieve re-accreditation as a San Diego-based institution (and I think they probably will), do they still need the Clinton campus?

The nuns who formerly ran that campus stuck to it for decades -- some of them are still there -- despite its lack of economic viability. Somehow I'm not convinced that BPI's executive team in San Diego will necessarily show the same level of commitment.

 

The post that I was responding to appeared to be suggesting that online schools could be entirely virtual and/or outsourced, without a distinct physical presence anywhere, and that this would pose difficulties in terms of accreditation:

My response was intended to point out that this hypothetical future institution would in fact be rather like MUST University. But I was addressing the hypothetical school proposed in the argument -- not present-day Ashford University, which obviously has an "actual presence" in San Diego, California.

 

Interesting how by "not" referring to us, you have somehow mentioned our names and referred to us nonetheless. Please note that I'm not necessarily a supporter of all profit schools. What I'm opposed to is the blanket condemnation of all profit schools in one broad generalization.

 

You either missed my point or you’re attempting to twist my words. My hypothetical scenario was campus based schools outsourcing online and non-academic services. I was using Ashford University as an example of an organization that may realize that potential in the future, but it could be Devry, University of Phoenix or who knows, maybe some state school will go crazy and actually be a trailblazer in something. The point I was trying to make was that outsourcing would reduce risk, cut costs, raise scalability and bring in revenue for online offerings...that was NOT supposing the school then close their campus and why would they, especially if they were making money at it? Ashford University has never been and likely never will be a “virtual” institution (not that I personally have anything against virtual schools). So I’m not “rediscovering and old argument” but nice try.

Secondly Ashford University is a distinct legal entity from their parent company as is the University of the Rockies. BPI can continue on even if Ashford closed their doors forever, as could the University of the Rockies. BPI may decide to open new schools or even “purchase” new schools (as repugnant as that may be to you). Though you may dismiss this as being “trivial” in the real world there is a very real distinction.

As for the 5,000 employees and 600,000 feet of office space, I’m not really sure what it takes to run a publicly traded parent company and two colleges but it doesn’t really matter since it does not negate the hundreds of people working in Iowa and Colorado. The issue here is what is meant by “significant presence”. 51% of operations? 10 to 1 ratios? What?

I doubt Ashford University would close their Iowa campus especially since they have invested tens of millions in it and let’s face it, they still make money on their campus programs. In fact I’d bet they open one or more new campuses, probably starting in California. Other for profit schools have done very well doing that very thing (Devry, University of Phoenix, Kaplan, etc.). Why would Ashford close their campus? They are not a bunch of nuns running a school and the economic viability of the school seems to be doing alright these days since their campus population is growing as well, in fact they’ve doubled the campus population since I first enrolled.

The point of the entire thread (which you seem to be missing or ignoring) is that the HLC has been coerced by the government into making a vaguely defined rule that is antiquated before the ink has even dried on the paper (given the nature of technology). They did this so that a private hedge fund investor can make his bones and screw not only the schools and BPI but lower income investors who use organization’s like mutual funds to manage their investments for them (such as myself and likely you too). In this scenario only one “evil” organization seems to be breaking the law and guess what? It’s not the school.

Anyhow, it’s beautiful outside...time to ride the bike.

 

Now there's the best suggestion I have heard all day. It's beautiful here too, I'm loading the mountain bike in the car and heading for the trails!

 

Boy, I wish...in Kentucky, we are having on and off thunderstorms.

 

I'm almost ashamed to say that it is about 75 degrees and sunny here.

 

Excellent thread. Good topics. I'll be watching BPI closely (in the market), based upon what I've read here.

 

Reminds me why I don't frequent this forum any longer. There is a lot of negativity here and an undercurrent of anticapitalism.