Re COCO, just to further beat this horse, here's an update to Reuters' update.
(Doesn't appear the extent of today's sell-off was justified, but JMO.)
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UPDATE 2-U.S. probing aid compliance at Corinthian school
June 24, 2004 4:21:00 PM ET
(Adds Corinthian comment, updates stock movements to close)
CHICAGO, June 24 (Reuters) - A U.S. Department of Education unit has found violations in how a Corinthian Colleges Inc. (COCO) school administers federal student aid programs, a spokeswoman for the department said on Thursday.
News of the finding, which was first reported in the Financial Times on Thursday, drove Corinthian's shares down as much as 16 percent and also weighed on shares of other companies that run for-profit colleges.
"The federal student aid office has conducted a program review, which looks at how the school administers its Title IV student aid funds, and has found significant findings of noncompliance with the regulations." said Jane Glickman, a spokeswoman for the Department of Education.
As a result of the findings, Corinthian's Bryman College campus in San Jose, California, cannot receive advances on federal aid funds, but must instead ask for reimbursement after the funds are given to students, Glickman said.
A spokeswoman for Corinthian said the Department found that financial aid offers at Bryman did not resolve discrepancies in applications for financial aid by students. Two financial aid officers at Bryman have been fired, the spokeswoman, Cecilia Wilkinson, said.
One analyst noted that investors reacted swiftly by selling off shares in similar companies.
"The fear is that if regulators or politicians or lawyers are being more aggressive with the sector as a whole, then other companies are going to be similarly pursued and there will continue to be bad headlines," said Mark Hughes, analyst at SunTrust Robinson Humphrey. "Whether or not they come up with anything doesn't matter, but the bad headlines will make the stocks trade down."
NO MATERIAL IMPACT
Wilkinson said that "being put on reimbursement" at one school will not have a material financial impact on the company. The move increases Corinthians' receivables by about $750,000 to $1 million out of a total of $52 million to $53 million, she said.
Corinthian has 45 days to respond to the finding and hopes to move Bryman back to normal financial aid funding status by the end of 2004, Wilkinson said.
Corinthian stock ended down $2.55 or more than 10 percent at $22.51 in active afternoon trading on the Nasdaq, after falling as low as $20.90, its lowest level in more than a year.
"Approximately 82 percent of Corinthian's revenues in fiscal 2003 came from federal financial aid, and any matter regarding financial aid should be taken seriously," said Merrill Lynch analyst Lauren Fine in a research note.
"This appears to be an isolated incident at one of (Corinthian's) campuses that has been addressed by the company," Fine said in her note. "We do not take this matter to indicate any broad-based issues regarding financial aid at Corinthian."
Stocks of other for-profit, post-high-school education companies also fell. Shares of Apollo Group Inc. (APOL) ended down more than 5 percent and shares of its University of Phoenix Online (UOPX) affiliate were down 4.5 percent, despite reporting a sharp increase in earnings at both businesses on Thursday. Also down was Strayer Education Inc. (STRA), which saw its shares fall 5.28 percent.
Late Tuesday, another company in the sector, Career Education Corp. (CECO), said that the U.S. Securities and Exchange Commission had ratcheted up a probe into unspecified issues at the company, sending its shares down sharply Wednesday.
Career Education shares initially were down Thursday, but finished up 1.45 percent at $44.75 on Nasdaq. REUTERS
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