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February 25, 2013
11:45 EDTESIITT Educational sinks after disclosing SEC probe
For-profit educational company ITT Educational (ESI) is tumbling after the company disclosed late Friday in a regulatory filing that it is being investigated by the SEC. The SEC subpoenaed, among other things, documents related to two private student loan programs launched by ITT, the company stated. The first private loan program was launched by ITT with an "unaffiliated entity" in 2009 and included a risk sharing agreement between the entity and ITT. The SEC also subpoenaed information related to the PEAKS Private Student Loan Program, which ITT initiated in 2010. Under the PEAKS program an unaffiliated lender provided loans to ITT students, and then sold the loans to a trust. ITT Educational agreed to guarantee the trust's debt, the company stated. In a note to investors earlier today, Wells Fargo analyst Trace Urdan reported that critics have said that ITT has not set aside enough money for both of these programs, and that the company should include liabilities from the programs on its balance sheet. If the SEC agrees with these conclusions, ITT may be forced to sell additional stock in order to provide sufficient collateral for its loans under federal law, Urdan wrote. Furthermore, the Department of Education may determine that the funds which ITT obtained from the loan programs should not qualify as independent cash tuition payments under the 90/10 rule. This rule requires for-profit education companies to obtain at least 10% of their revenue from sources other than the federal government. Under either of the scenarios, ITT students may be temporarily unable to obtain student loans, Urdan wrote, but added that he doesn't expect this scenario to occur. The analyst maintained a Market Perform rating on the stock, which sank $2.50, or 13.5%, to $16.05 in late morning trading.
News For ESI From The Last 14 Days
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August 26, 2014
07:25 EDTESIITT Educational has negative read through from Corinthian, says Wells Fargo
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August 25, 2014
08:52 EDTESIITT Educational volatility elevated into Q2 and outlook
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07:23 EDTESIGovernment not looking to push other colleges out of business, says Wells Fargo
In the wake of Corinthian Colleges' (COCO) dissolution due to actions taken by the Department of Education, Wells Fargo thinks the government did not intend for this scenario to unfold. After speaking with unnamed "knowledgeable sources" about the issue, the firm does not expect the department to take similar actions in the future because doing so would create too much of a workload for the department, Wells believes. Publicly traded companies in the space include American Public Education (APEI), Apollo Education (APOL), Bridgepoint Education (BPI), Career Education (CECO), Corinthian Colleges (COCO), DeVry (DV), Grand Canyon (LOPE), ITT Educational (ESI) and Strayer (STRA).

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