Why ITT Educational Services Shares Plunged
Feb 25th 2013 4:40PM
Updated Feb 25th 2013 5:35PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of ITT Educational Services were getting a failing grade from investors today, falling as much as 17% after it revealed that it was being investigated by the SEC.
So what: The probe centers on the for-profit educator's private loan programs, and the accounting for those loans. In a statement, ITT said, "There can be no assurance that the ultimate outcome of the SEC investigation will not have a material adverse effect on our financial conditions or results of operations."
Now what: The SEC investigation is the latest example of the Obama administration's scrutiny of the for-profit education sector. We don't know the outcome from this particular investigation, but these schools have seen enrollments declining as students have struggled to pay back loans, and many of the schools spend more money on marketing than on education. Industrywide, these stocks have fallen sharply over the past year. Today's news seems to be one more reason to stay away.
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