INVESTOR PLACE: Will For-Profit Colleges Give Up and Become Nonprofits?

Career College Central Summary:

  • Grand Canyon Education Inc. (LOPE) is reportedly considering a $2 billion move to take itself private, seeking to buy out shareholders to escape the for-profit college label.
  • According to Bloomberg, “The university told shareholders on Oct. 29 that it was exploring buying them out and converting to a nonprofit college as investigations of other schools tarnish the industry’s image.”
  • The amazing thing is that Grand Canyon is, in fact, quite profitable. While some for-profit colleges have cratered lately, with COCO stock down 92% in the last 12 months as Corinthian struggles to make a profit, LOPE stock is up slightly in the last year and has seen steadily rising revenue and profits for some time.
  • The university may be different, of course, because despite its for-profit operations it has carved out a niche as a Christian-affiliated institution and seems to be more concerned with doing things right than just making a quick buck.
  • That could explain the motivation for the move.
  • “The stigma surrounding the for-profit industry — some of which is deserved, and some not — is real and it is not improving,” Chief Executive Officer Brian Mueller wrote on the GCU website recently. He went on to say that “We believe it is the right time to consider an alternative to that model if it could be done in a way that would provide shareholders a fair return on their investment while also ensuring the long-term stability and legacy of the institution.”
  • So is this a rarity among for-profit colleges, or a trend?
  • Well, call me skeptical … but I don’t see Education Management Corp doing this anytime soon. It’s partially owned by Goldman Sachs Group Inc. (GS), and I’m sure profits are the most important motivation for that investment.

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