How Nonprofit Grand Canyon Could Enrich Holders

Career College Central Summary:

Grand Canyon Education (NASDAQ:LOPE) shareholders could cash out big if the for-profit education provider follows through on converting to nonprofit status and ditches the stock market.
The Phoenix-based company announced late Wednesday that management is exploring whether to become a traditional nonprofit university.
Shares jumped 12% to a seven-month high in the stock market today.
The stock rally is comparable to those seen when a publicly traded company goes private and stockholders are bought out at a premium, says Jeffrey Silber, an analyst at BMO Capital Markets, adding that Grand Canyon could fund the switch with a bond offering.
The company's current market capitalization is $2.26 billion, meaning public shareholders will have to be paid in excess of that amount, says Alexander Paris, an analyst at Barrington Research.
At least six more months of management discussions will ensue before any additional steps are taken, he noted. "There's no assurance this is going to go through."
Grand Canyon, which operates eight colleges and a 186-acre Phoenix campus as well as online courses, would save money in taxes and be able to invest that money on facilities and students if it converts.
Getting out from under the cloud of suspicion from the Education Department regarding for-profit colleges, which are seen by their critics as saddling students with mountains of student loan debt and unhelpful degrees, likely is another factor.
"(The Obama) administration has been at war with for-profit educators," Paris of Barrington Research said, adding that Grand Canyon's decision to explore nonprofit status reflects "a little bit of exhaustion by management."

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