Corinthian Colleges Inc., a for-profit college chain under investigation for allegedly falsifying grades and job placement data, said it might have to cease as a going concern after the government limited its access to federal student aid.
The U.S. Education Department put Santa Ana, California-based Corinthian on heightened financial oversight after repeated requests for information, the department said today in a statement. Corinthian will now have to wait 21 days after submitting enrollment data to draw on student-aid funds, rather than a maximum of 72 hours.
Corinthian plunged 67 percent to 28 cents in New York, the biggest drop since it began trading in February 1999. The stock has lost 84 percent of its value this year.
“The company’s cash balances will be insufficient to sustain it through this transition period,” Corinthian said today in a regulatory filing, adding that talks with banks about a bridge loan have been unsuccessful. An inability to find alternative financing “would cause the company to be unable to continue as a going concern.”
For-profit colleges are suffering enrollment declines amid investigations by Congress, the Justice Department and state attorneys general into their recruitment and student borrowing practices. While students can improve their job prospects with online, for-profit college programs, too many of them are left with debt and no degree, Education Secretary Arne Duncan said in March.
Michael Tarkan, an analyst at Compass Point Research & Trading LLC in Washington, cut his price estimate on Corinthian shares to zero from 50 cents.
“Even if they can dodge this bullet, which is a long shot, they have so many regulatory and operational overhangs, and they don’t have the capital to withstand that pressure,” Tarkan said in a telephone interview.
The Education Department took action “after the company failed to address concerns about its practices, including falsifying job placement data used in marketing to prospective students and allegations of altered grades and attendance,” the department said in today’s statement.
Kent Jenkins, a spokesman for Corinthian, declined to comment.
The increased oversight applies to Corinthian’s Everest, WyoTech and Heald brands, the department said. The schools had a total of about 75,000 students as of the end of March, Corinthian said in May.