Citron Research Gives The Apollo Group (APOL) An F
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Today, notorious short-selling research outfit, Citron Research, published a negative piece on education provider, Apollo Group (Nasdaq: APOL). Citron noted that The Apollo Group ostensibly reported strong quarterly results this past quarter, but Citron thinks the growth is more of a "one-time bump than a sustainable trend."
Citron says a lawsuit brought by students regarding student loans could damage Apollo Group.
Title IV loans are the backbone of the revenuefor the entire for-profit education industry. Apollo derives over 77% of its revenue from these loans. As such, institutions receiving Title IV funding are required to meet a variety of regulations, including a cap on the ratio of government loan funds to cash revenue.
"The class action represents students who withdrew shortly after enrolling at The University of Phoenix. In each case, although UOP had already received the student's loan proceeds, they refunded 100% of it to the government, and opted instead for the far less lucrative path of trying to collect directly from the student."
"By returning the money to the government, they are effectively prohibiting that person from being factored in their cohort default rate. This manipulation is a clear violation of the mandates of HEA," says Citron.
Citron admits it doesn't know the full explanation of Apollo's motives for this clearly illegal policy. "Nor is Citron suggesting that APOL is at immediate risk of losing their Title IV eligibility (an event which would cause devastating changes to the company's business model.) We can speak from experience in saying that when a business forgoes profits, it is time for investors to pay attention."
You can read Citron's post in its entirety here.
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Apollo Group, Inc. (Apollo Group)is a private education provider.
Citron says a lawsuit brought by students regarding student loans could damage Apollo Group.
Title IV loans are the backbone of the revenuefor the entire for-profit education industry. Apollo derives over 77% of its revenue from these loans. As such, institutions receiving Title IV funding are required to meet a variety of regulations, including a cap on the ratio of government loan funds to cash revenue.
"The class action represents students who withdrew shortly after enrolling at The University of Phoenix. In each case, although UOP had already received the student's loan proceeds, they refunded 100% of it to the government, and opted instead for the far less lucrative path of trying to collect directly from the student."
"By returning the money to the government, they are effectively prohibiting that person from being factored in their cohort default rate. This manipulation is a clear violation of the mandates of HEA," says Citron.
Citron admits it doesn't know the full explanation of Apollo's motives for this clearly illegal policy. "Nor is Citron suggesting that APOL is at immediate risk of losing their Title IV eligibility (an event which would cause devastating changes to the company's business model.) We can speak from experience in saying that when a business forgoes profits, it is time for investors to pay attention."
You can read Citron's post in its entirety here.
Subscribe to EasyStockAlerts.com Now & Get The News Before Everyone Else!
Apollo Group, Inc. (Apollo Group)is a private education provider.
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