Activist short seller Safkhet Capital Management LLC said this morning that it is targeting shares of for profit education company Adtalem Global Education, claiming the company contains existential risks that aren’t priced in.
The stock was hit early in the trading session on the news and continued lower throughout the afternoon, falling about 20% by mid-day.
Safkhet may be best known for its call in 2015 against Valeant Pharmaceuticals, which eventually wound up losing more than 90% of its market cap after numerous scandals, including revenue recognition issues, were unearthed at the giant pharma rollup.
It was also short Wirecard, which went bunk in 2020 in the midst of a chorus of allegations of fraud.
“Adtalem Global Education is a for-profit university operator that has benefited from billions in public funds, last year collectively bringing in more Title IV funding than any public, non-profit, or proprietary institution,” Safkhet wrote on X Tuesday morning.
“After our extensive research, including interviews with former executives and students, we believe the business model is simple: fast and loose admissions made possible by aggressive and sometimes deceptive tactics.”
Safkhet said the company is “teetering towards a reckoning as nearsighted business decisions clash with historically high rates, looming regulations, and a generation of students empowered to fight back”.
“Enrollment trends show stagnation with multi-year declines in the medical and veterinary schools, now poised to deteriorate further as superior, more affordable options become available onshore,” they continued.
They also allege the Department of Education has launched an investigation into ATGE subsidiary Walden that has not yet been disclosed.
“Expired program participation agreements across most of ATGE’s schools create the risk of greater collateral requirements and delays in the permitted drawdown of federal funds,” the firm wrote.
“We find ATGE’s future contains far too many potentially great and existential risks which are not adequately reflected in its current value.”
The firm also launched a website called “Debt for Degree” where you can read the full report.
Adtalem didn’t immediately respond for comment to Bloomberg, the news org said in a brief Tuesday morning wrap up of the report. We will monitor the newswires for a response.
Tyler Durden
Tue, 01/30/2024 – 13:05
