Stock of for-profit Bridgepoint Education is down 22.3% to $16.70 this morning (July 9) after the company revealed its Ashford University -- which accounts for almost all of its revenue -- has been denied accreditation by the Western Association of Schools and Colleges. Bridgepoint has been a favorite target of those in Congress who want to reform the ethically challenged for-profit college sector. Bridgepoint spends a fat percentage of its funds on recruiting students for high-priced online education that leads to few jobs, as Sen. Tom Harkin of Iowa has pointed out for years in several reports. The company's dropout rate is amazingly high, as Harkin has frequently reported. The company has been a darling of Wall Street -- and of the San Diego establishment -- because of high profits and, locally, generous spending on events such as the Holiday Bowl.
According to Inside Higher Ed, "Ashford remains accredited by the Higher Learning Commission of the North Central Association of Colleges and Schools, but it had sought accreditation in the West -- where Bridgepoint is headquartered -- in part because of the Higher Learning Commission's increasingly chilly treatment for non-profit institutions."
Forbes Magazine said this morning, "Ashford is in danger of losing its remaining accreditation" from the Higher Learning Commission. Without accreditation, the company could lose access to federal aid, points out CBS News. Without federal money, the company would have little left.
Bridgepoint says it will appeal Western's decision and reapply for accreditation. The Western Association is supposed to come out with a statement later today. Meanwhile, the company faces pressure from the federal Department of Education, which wants to clean up much of the for-profit college industry, but faces opposition in Congress from Republicans. Bridgepoint gets more than 85% of its revenue from the federal government's grants and loans to students.
Bridgepoint has been a pingpong ball in the stock market. It has usually had a huge short position, or investors betting that the stock will go down because of the ethical problems that have been well known. But when a company's short position gets exceedingly high, any good news can force the shorts to buy the stock, or cover their shorts, thus sending the shares skyward. This has happened to Bridgepoint more than once.