BPI - Bridgepoint Education

[PlanMaestro]

BPI was hit hard after  Ashford was denied accreditation by the  Western Association of Schools and Colleges. It is worth reminding that Ashford is accredited through the 2014-15 school year by the North Central Association of Schools and Colleges where it is based. So my understanding is that this slows their internet expansion plans but not its current revenue base. Of course, this action might confirm bad preconceptions and worries about the sector and of Bridgepoint in particular.

 

I don't know very well the regulatory intricacies (the rest looks very simple) besides I prefer regulated sectors that passed the test of time. But it seems that Bridgepoint is one of the better behaved for-profit colleges and the action letter also seems to confirm that they are not crooks or a scam. Besides, BPI may appeal or reapply next year.

 

So it seems a question on how to handicap the regulatory and legal risk plus BPI's capacity to improve retention and completed degrees. The financial numbers are great providing a cushion to expend what's necessary to reach adequate quality numbers.

 

I must be not the first to look into this since BPI won the Ira Sohn contest last year, so I am curious what others think.

 

1. Attached is the commission action letter and there is a little more information at the WASC site.

2. Transcript of Sunjay Gorawara’s Speech at the Ira Sohn Conference – Bridge Point Education http://www.santangelsreview.com/2011/06/01/transcript-of-sunjay-gorawaras-speech-at-the-ira-sohn-conference-bridge-point-education/

3. Steve Eisman's Subprime goes to College

http://www.scribd.com/doc/32066986/Steve-Eisman-Ira-Sohn-Conference-May-2010

4. Several links to the for-profit education debate

http://classicvalueinvestors.com/i/2011/07/attack-on-the-for-profit-education-industry/

5. Some comparison with competitors from the Manual of Ideas

http://www.manualofideas.com/files/content/moi20110701_corinthian.pdf

 

No position.

 

 

[PlanMaestro]

I am attaching also the WASC team report.

 

Going through the information once again, it strikes me that they had to emphasize that NCASC might review their accreditation soon. They are under heavy review specially because they are like 90% reliant on internet education. They have a large cash position and their huge margins give space to accommodate new requirements but it still looks too early to handicap.

 

Good case to follow and pick on the detailed information on the sector and a prominent participant.

Team_report_June_2012_action.pdf

[abcd]

This can easily be trashed as attack on capitalism by left but this gives an impression that BPI is heavily reliant on this accreditation.

 

Quote from the article

"Six years ago, Bridgepoint purchased what was then called Franciscan University of the Prairies, a near-bankrupt, 300-student college that for decades had been run by a local order of Franciscan nuns. The school delivered a crucial commodity: legal accreditation. That enabled Ashford's students to tap federal financial aid dollars, the source of nearly 85 percent of the university's revenues -- more than $600 million in the last academic year. Ashford now counts nearly 76,000 students, 99 percent of whom take classes online."

 

http://www.huffingtonpost.com/2011/03/09/ashford-university-for-profit-college_n_833735.html?page=1

 

[PlanMaestro]

Wow, almost 25% down today and close to net cash territory.

 

Investors have been dumping Bridgepoint Education anew as the parent of Ashford University now says the school is being monitored for accreditation compliance.

 

But Wells Fargo says the issue should be easily resolved and calls today’s stock slump surprising, as the news is not. The monitoring status follows a recent notice that Ashford’s application for initial accreditation was denied.

 

With BPI trading close to its cash balance, “we believe the call here is on whether Ashford is capable of achieving regional accreditation at all.”

 

Wells says it is, and that accreditors will be reluctant to cause damage to past and current students by putting Ashford out of business.

 

BPI is down 24% at $9.85, putting the week’s tumble at 54% and the stock at a new low. The company went public in 2009.

[PlanMaestro]

This comment at the Value Investors Club is very good. BTW, has anyone seen the presentation that won the Ira Sohn contest? I've only been able to find the transcript.

 

Sorry for the delayed response, still trying to figure out the implications of the WASC action.  The short answer is that this puts the stock in the "to hard bucket."  While we had viewed a failure to recieve accreditation as a low probability outcome, we viewed the WASC accreditation process as the most substantial risk given the implications for the value of the business as a school is ineglible for TITLE IV funding without accreditation. 

 

The WASC citied the following areas of non-compliance for BPI  (You can download the WASC team report and action letter at the WASC website):

 

[*]Attrition and support for student achievement

[*]Adequacy and alignment of resources with educational repsonses

[*]Adequacy of faculty model and role of faculty

[*]Effectiveness of program review

[*]Assessing student learning and program rigor

[*]Independence of the Ashford governing board

[*]After reading the WAC action letter it appears the a number of the issues cited

 

While there are a number of actions management could take to remedy the above issues.  Addressing the collective set of issues appears to be a substantial challenge, particularly the issues around attrition.  Addressing many of these issues will also negatively affect the earnings power of the business (addressing attribution will likely mean slower growth or a contraction in the student body, and many of the resource related issues imply substantial incremental investments).  Additionally, the WASC repeatedly highlights that Ashford had made efforts to address the areas citied above, but the impact of the pilots could not yet be measured.  This suggests that even if they are able to address the issues it will still be unclear whether there has been sufficient time (or will the commission believe there has been sufficient time) for those initiatives to have a measurable impact.  Lastly, even if they get accredited by the WASC they would still need the DOE to approve the change in accreditor.  The DOE apporval process could take years and we would assume not to be a certainty given the recent WASC action.

 

On the positive side they maybe able to to retain HLC accreditation (through the 2014/2015) calander year if they can move a substanital amount of the infrastruture to Iowa.  This would give them more time to address whatever accreditation deficiencies they had with the HLC and give them another few years of cash flow.  For context the company had ~$7 - $8/share in cash and our projections had them generating an additional $7.5 of un-discounted cash flow generated during this period (our model probably isn't valid in an enviornment where the accreditation status will likely go away).  So one could argue that your getting a cheap call option on their ability to be accredited.

 

One other note is that I think this is indicative of a higher level of risk for the industry as a whole as every company in the space will need to be reaccredited at some point in the future.  While BPI's specific issues, the challenges of managing an online model, and BPI's growth likely created unique challenges for BPI, we believe BPI likely faced a higher threshold than traditional/not for profits.

[PlanMaestro]

Harkin Report. Auch.

 

http://www.help.senate.gov/imo/media/for_profit_report/PartII/Bridgepoint.pdf

 

 

Now, how to balance the obvious needs and benefits of for-profit education against its runaway tuition prices and deceptive practices.

 

In its description of Bridgepoint, for example, the committee discusses the recent accreditation woes of Ashford, an institution that was the subject of a hearing during the investigation. The report praises the Western Association of Schools and Colleges (WASC) for its “thorough review” of the university, which resulted in a rejected bid for accreditation. In contrast, the report takes to task the Higher Learning Commission, Ashford’s regional accreditor, for three “relatively cursory” reviews of the university, which Bridgepoint bought in 2005.

 

Harkin’s tone during the investigation has been fiercely critical, so the inclusion of a few conciliatory notes in the report may be a surprise to some observers. It notes that the sector will continue to play an important role in higher education, in part because nonprofit colleges lack the capacity to serve growing demand

 

For-profits should be well-equipped to serve nontraditional students, at least “in theory,” the report said. “They offer the convenience of nearby campus and online locations, a structured approach to coursework and the flexibility to stop and start classes quickly and easily. These innovations have made attending college a viable option for many working adults, and have proven successful for hundreds of thousands of people who might not otherwise have obtained degrees.”

 

Read more: http://www.insidehighered.com/news/2012/07/30/harkin-releases-critical-report-profits#ixzz27tTiI73m

Inside Higher Ed

 

 

[PlanMaestro]

Reading Between The Lines Of Bridgepoint And Apollo Accreditation Announcements

http://seekingalpha.com/article/1545832-reading-between-the-lines-of-bridgepoint-and-apollo-accreditation-announcements?source=yahoo

[bskptkl]

Well at very least, it's worth buying 99 shares and tendering at $19.50.

[Vish_ram]

Did anyone of you get the $ after submitting it for tender? How long does it generally take?

[LC]

Did anyone of you get the $ after submitting it for tender? How long does it generally take?

depends on your broker...usually takes mine about a week or so.

[wknecht]

Did anyone of you get the $ after submitting it for tender? How long does it generally take?

depends on your broker...usually takes mine about a week or so.

The offer doesn't expire until 12/11. So I thought you wouldn't get the cash until probably two weeks after that date, no? Didn't think this would differ for odd lots.

[LC]

Did anyone of you get the $ after submitting it for tender? How long does it generally take?

depends on your broker...usually takes mine about a week or so.

The offer doesn't expire until 12/11. So I thought you wouldn't get the cash until probably two weeks after that date, no? Didn't think this would differ for odd lots.

Yes I meant from the date the offer expires. I'm expecting the BPI cash somewhere around Dec 20...kind of like a Christmas gift from my broker? I guess it might take longer :P

[siddharth18]

Just a quick question about how these things are tracked on the back-end by the company -

 

Is it 99 share lots- per person (based on social security number) ? Meaning they will reject the tender if it do it in my PA and my IRA ? Or is it account based/regardless of SSN - can't do this on each of his PA's right (once at IB, once at Fidelity, once at TDAmeritrade)?

 

 

[hyten1]

i  have done it using different accounts at different institutions (fideilty, tdameritrade, etrade etc.)

 

i always thought its SSN too, but it worked for me before. so not sure how its done in the back end

 

hy

[siddharth18]

Thanks! I'll try across all my accounts too, then. I guess the only risk is the stock-tender fee or in case the stock implodes overnight.

[siddharth18]

A little tender 101:

 

Just spoke to the guy at ETrade in their corporate action team. Pretty straightforward actually - just asked me if I knew the terms, knew E*Trade's fees for tender and told me now to sell the shares. I said, yes and yes. I asked him if he knows how these things are tracked on the backend - he said I could do this at every single brokerage on the same name without a problem.

 

The expiry on the tender is the 11th but brokerages keep the deadline at least 1-2 days before the company's deadline for all the paperwork. Cash should post to our accounts within 1-2 weeks of the tender offer close.

 

Oh and E*Trade does refund the tender fee if, for some reason, the tender doesn't go through.

[bargainman]

FYI TD ameritrade no longer will  tender different accounts separately.  So if you have a regular, and IRA account, they have to tender *all* the shares at once.  This was not the case a year ago, but it is now.  In theory other brokers could provide your ssn and the company could cross check your accounts to make sure you're an odd lot owner.  But I haven't seen that happen.  But.. TD ameritrade is not letting you do it anymore for multiple accounts under them...

[siddharth18]

FYI TD ameritrade no longer will  tender different accounts separately.  So if you have a regular, and IRA account, they have to tender *all* the shares at once.  This was not the case a year ago, but it is now.  In theory other brokers could provide your ssn and the company could cross check your accounts to make sure you're an odd lot owner.  But I haven't seen that happen.  But.. TD ameritrade is not letting you do it anymore for multiple accounts under them...

 

Thx for that update. I just have one account at TDAmeritrade (that too via HSABank),  but I have multiple elsewhere. Let's see how it goes.

[siddharth18]

http://ir.bridgepointeducation.com/investor-relations/news/Press-Release-Details/2013/Bridgepoint-Education-Announces-Preliminary-Results-of-Tender-Offer/default.aspx

 

 

Can someone explain what "notice of guaranteed delivery" means? Warburg Pincus tendered 38.5MM shares via "notice of guaranteed delivery." Do they receive the same pro-ration and not receive preference in the tender offer?

 

 

Also there was a lawsuit filed regarding the tender http://www.law360.com/articles/494466/bridgepoint-education-tender-offer-is-disloyal-suit-says (requires registration - I've attached it)

BPI.pdf

[siddharth18]

Any updates here? I see cash posted in my E*Trade, Fidelity, TradeKing, TDAmeriTrade and IB accounts.

 

 

MerrillEdge account shows pending credit of $1900.5 (so looks like that cash hit it too)

 

I see all 99 shares in my ShareBuilder account. They aren't pro-rated yet so I'm going to assume they all will be tendered. Anyone in the same boat as me?

 

Should net about $1188 (including tender fees, trading fees) across all accounts - which I know is peanuts for the big boys here - but pretty sweet for me for placing ~12 trades, few calls/emails and waiting 15 days.

 

Cheers.

 

EDIT: Updated

[Gopinath]

I got the cash from from my IB tender today.

[jmoy911]

Got the cash from IB, Firstrade and Schwab.

[jmoy911]

Very nice gains on very little work siddharth18. Do you have multiple accounts with the same broker? If so, are they all different types of account (regular brokerage, Roth IRA, Traditional IRA, etc.)?

 

Any updates here? I see cash posted in my E*Trade, Fidelity, TradeKing, TDAmeriTrade accounts. I see 0 shares and no cash in my IB account but their rep informed me it'll be posted to my account in today's statement.

 

I see all 99 shares in my MerrillEdge account and ShareBuilder account. They aren't pro-rated yet so I'm going to assume they all will be tendered. Anyone in the same boat as me?

 

Should net about $1188 (including tender fees, trading fees) across all accounts - which I know is peanuts for the big boys here - but pretty sweet for me for placing ~12 trades, few calls/emails and waiting 15 days.

 

Cheers.

[siddharth18]

Very nice gains on very little work siddharth18. Do you have multiple accounts with the same broker? If so, are they all different types of account (regular brokerage, Roth IRA, Traditional IRA, etc.)?

 

Any updates here? I see cash posted in my E*Trade, Fidelity, TradeKing, TDAmeriTrade accounts. I see 0 shares and no cash in my IB account but their rep informed me it'll be posted to my account in today's statement.

 

I see all 99 shares in my MerrillEdge account and ShareBuilder account. They aren't pro-rated yet so I'm going to assume they all will be tendered. Anyone in the same boat as me?

 

Should net about $1188 (including tender fees, trading fees) across all accounts - which I know is peanuts for the big boys here - but pretty sweet for me for placing ~12 trades, few calls/emails and waiting 15 days.

 

Cheers.

 

I manage my personal account, parents' personal account, their IRA accounts, and my HSA account.

 

Accounts are various brokerages are mainly from the time when I signed up for them when they ran sign up promos.

 

For example, with Sharebuilder, this year they had a blackfriday signup offer (screenshot http://i.imgur.com/FUMFPU4.png) where you could get $150 cash for placing 3 trades. So I signed up myself and my parents.

 

For this tender, my math was something like this:

 

Gross profit = $1568

Tender fees = $321

Trading commissions = $64

Net profit = $1183

 

Oh btw - this was my first tender.

 

Cheers!

 

PS: I'm looking at this list and wondering what's stopping someone from opening accounts at all of those places. It's a lot of work but once you have them set up, it should be easy as most places don't have minimum/dormancy fees but when a tender comes along, you could milk it very well. I know one guy who'd be interested!  ;D

[siddharth18]

I contacted ShareBuilder as to why I still see the shares in my account and not the cash from the tender, in spite of the fact that I have received cash across all other brokerages. They said that other brokerages post cash in anticipation of the payment from the company, before the company actually sends the cash <--- which I think is bull***t. No brokerage is kind enough to post cash before they actually receive it.

 

I still see shares all 99 shares across all 3 of our ShareBuilder accounts.

 

Any ideas here? They just asked me to wait...