The stock of the embattled for-profit college chain ITT Technical Institute has fallen 40% since last week, after the company's quarterly earnings report gave a bleak outlook for the next year.
After two straight quarters of strong profits, ITT seemed to have won some investors' confidence in its financial future. The company's last earnings report, which was delayed and released in June, sent its stock shooting up by 43%, predicting only modest enrollment declines that were on line with what other for-profit colleges were expecting.
But ITT was forced to revise that last Wednesday, saying that new enrollments would likely decline more precipitously than it had expected, on top of an 18% decline in new enrollments last quarter. ITT lost a quarter of its valuation overnight, then fell by another 28% in the following days, closing at just above $3 on Monday.
"Pointing towards those future enrollment declines really spooked investors," said Trace Urdan, an independent industry analyst.
Since the collapse of the for-profit Corinthian Colleges last year, ITT has become a target of regulators and activists who say the company's aggressive enrollment tactics and lending practices mirror those of Corinthian. In 2014, the Consumer Financial Protection Bureau announced a lawsuit against ITT for its private student loan program, and earlier this year, the SEC charged the company and its two top executives with fraud over those same loans.
Rohit Chopra, a former regulator at the Consumer Financial Protection Bureau who was the bureau's student loan ombudsman during the suit against ITT, sent a letter late last month to a group of ITT shareholders, warning that he had "serious concerns that ITT is not properly managed."
Chopra, now a fellow at the left-leaning Center for American Progress, said he believed that "unless investors provide more vigorous oversight over management and the board, ITT will continue to harm both its students and its shareholders.”
ITT did not respond immediately to a request for comment.
Urdan said that he suspected investors had also lost confidence in ITT's management. Even as he faces fraud charges from the SEC, ITT's CEO, Kevin Modany, has remained at the top of the company, which has continued to push back his date of departure as it searches for a replacement, Urdan said. In August, 2014, Modany said he planned to resign from the company in six months.
"It suggests some combination of a lack of clear leadership at board level, and maybe difficulty finding anyone who wants to step into role," Urdan said. "Investors are being asked to take a lot on faith."
Rohit Chopra was the student loan ombudsman at the Consumer Financial Protection Bureau during its lawsuit against ITT Tech. A previous version of this article said that he had led the suit.
Molly Hensley-Clancy is a politics reporter for BuzzFeed News and is based in Washington, DC.
Contact Molly Hensley-Clancy at email@example.com.
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