Grand Canyon Education, Inc. (LOPE) Accused of Misleading Shareholders
In July 2018, Grand Canyon spun-off of its education assets through a sale to non-profit entity, Grand Canyon University (“GCU”). The spin-off resulted in Grand Canyon becoming an alleged third-party provider of education services to GCU while GCU was to operate as an independent, non-profit entity. Following this spin-off, Grand Canyon consistently touted growth in net income and adjusted EBITDA. However, on September 9, 2019, Citron Research published a report revealing that it believed Grand Canyon ” stuffing GCU with expenses to inflate its own profitability and as a result bankrupting GCU.” About two months later, Grand Canyon announced its application for GCU’s designation as a non-profit had been denied by the U.S Department of Education (“DOE”). Then, on January 28, 2020, Citron Research expanded on the DOE’s findings, stating that Grand Canyon was the “educational Enron” that used its non-reporting subsidiary to “dump expenses and liabilities, while receiving a disproportionate amount of revenue at inflated margins…to artificially inflate the stock price.” Following these disclosures, Grand Canyon’s stock price fell $30.40, or 26%, to close at $84.07 per share on January 28, 2020.
