Edison Schools Keeps Falling

Shares of Edison Schools (EDSN Quote) resumed their downward trajectory Thursday after the operator of public schools said it was unable to file its quarterly report on time, citing a recently issued Securities and Exchange Commission order which required adjustments in its financial statements.

The latest drop comes as Edison lost a contract three years before it was to expire with Boston Renaissance Charter School. Recently, Edison was off 17.3% at $1.86, which is 90% below beginning-of-the-year levels.

According to an article in The Wall Street Journal Thursday, Boston Renaissance added $9 million in revenue to Edison annually. But Edison said that the loss of the contract -- and the associated change in revenue -- was built into the guidance that it gave in its third-quarter earnings call Tuesday.

On Tuesday, Edison Schools reported a third-quarter loss of 31 cents a share and announced that an informal SEC inquiry into its accounting would require it to reclassify revenue, mainly related to teacher salaries. The reclassification involved money that was listed as revenue but which was never in the company's possession because it went from the school districts directly to payees.

Edison said that the revenue reclassification would have "no effect on its operating results as originally reported," because it would be lowering expenses by the same amount it was cutting revenue.

Nevertheless, Edison has subsequently been stung with shareholder lawsuits that allege it misrepresented and inflated revenue, and similarly misrepresented and deflated its liabilities.

"Edison over-reported revenue by recording as revenue money paid for teacher's salaries, student transportation and utility bills that were remitted directly by Edison's clients," Wechsler Harwood Halebian & Feffer, a law firm representing Edison shareholders, alleged on Thursday.