Since this scam has been going on for a long, long time, I don’t think he would be my first-choice investment adviser:
Hedge fund titan and education reform activist Whitney Tilson turned his Value Investing Congress speech Tuesday into an all-out attack against technology-based education company K12, calling it “a catastrophe for education” in spite of solid financials.
But even more damning for K12, which runs online schools at various levels, was Tilson’s decision to publicly short the company’s stock—a move that can be risky for high profile investors, attracting regulators and legal action from disgruntled CEOs. If K12’s stock indeed plummets in the coming months, Tilson and other short sellers stand to make a lot of money.
Tilson outlined his exhaustive research on K12’s academic practices, including poorly paid instructors with 300-1 student-teacher ratios, the targeting of at-risk children whose parents won’t complain to administrators about poor performance, and online classes for which students merely have to switch on their phones and login to be counted as active.
But Tilson also noted K12’s financials, which up to this point have been strong: the company has experienced revenue growth of 32% annually for the past decade. What’s more, the company estimates a $15 billion market for K12 students, and average revenue per student has risen over the last four quarters.
Well, a degenerate gambler and a finance-industry felon created K12, which was a bit of a red flag for this “investor” but apparently not for the hedge fund managers who make up “Democrats for Education Reform.”
It’s strange to watch this slowly spread upward to the highest levels of reform industry leadership, because here in Ohio where ed reform is a huge business we’ve had a failing cybercharter industry sector for many years. I first became aware of this particular ed reform portfolio investment several years ago, when some of the most vulnerable kids we encountered in the court system stopped attending local public high schools and decided to leverage the free market power of “choice” by signing up for cyberschool.
That many of them are completely unsupervised at home for a variety of reasons and chose this option to avoid intrusive questions from the “educrats” at our government school on their GPA, progress toward graduation, mental health issues and chaotic and often tragic home lives didn’t seem to concern national ed reform industry leaders like Jeb Bush and John Kasich but we wondered at the time if cutting them loose like that was a very bad idea. It had come to our attention that many of them do poorly in school not because their teachers belong to a union but because their home lives are an absolute horror show. It reached the point a couple of years ago where even the most conservative juvenile judge I’m in front of took to bellowing at us that these kids should all be “IN SCHOOL!” Incredibly, ed reform industry lobbyists in Ohio just expanded cybercharters. Again.
As anyone who has watched Milton Friedman’s crackpot theories go from roundtable to reality already knows, it is really, really difficult to regulate a publicly-funded private entity once deregulation and then industry capture of politicians takes hold. We know it in Ohio, and they’re finding it out in Pennsylvania, where a cybercharter profiteer inexplicably escaped state oversight and regulation for years, until he was finally indicted by the feds last month.
I hope this reform industry leader’s shorting strategy works, because K12 just captured another student sector, in New Jersey, despite the fact that the giant ed corp has failed so miserably everywhere else. Whether the following is related to that decision I do not know:
Christie’s acting education commissioner, Christopher Cerf, has experience in public-private school partnerships. He previously led Edison Schools, a for-profit company that became the largest private-sector manager of public schools. From 1999 to 2001, Christie was a registered lobbyist at a law firm that lobbied New Jersey government on behalf of Edison Schools, according to filings with the state Election Law Enforcement Commission. While the firm was representing the multinational education company, Chris Cerf was its general counsel. The firm, Dughi, Hewit and Palatucci, also represented Mosaica Education, a for-profit charter school operator, and the University of Phoenix, a for-profit online university.
Since we already know that for-profit colleges are a predatory rip-off and nearly impossible to regulate due to industry capture of politicians on both sides of the aisle, can anyone tell me why we decided to expand this bad idea? Are we really this fucking reckless and stupid, that we’d privatize our K thru 12 public education system? Tell me there’s a responsible adult somewhere in the state or federal government who has a handle on this, because I’m not seeing anyone step up here in The Heartland and Arne Duncan seems to me to have abandoned traditional public schools completely.