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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