5. Bridgepoint Flunks Out
Shares of the for-profit education provider sank 34% Monday after its Ashford University, which has a campus in Iowa but mostly caters to online students, was denied initial accreditation by the Western Association of Schools and Colleges because it failed to reach the WASC's standards. As a result of the ruling, Ashford may lose its access to federal financial aid, the major source of revenue for the industry.Come on dudes, how dumb can you be? This is a test you absolutely cannot fail if you want to survive. And let's be honest guys, we're talking about passing a WASC standards board here, not gaining acceptance into the Ivy League. Apparently Ashford's main problem is not getting students in the door, but keeping them enrolled. More than 240,000 new students matriculated at Ashford over the past five years, according to the WASC's rejection letter, but roughly 128,000 students dropped out over the same period. And just to be clear, unlike the stars of the University of Kentucky basketball team, Ashford's so-called students are not taking off for the NBA draft. They are simply taking off. What's worse is that Ashford could lose its remaining accreditation with the Higher Learning Commission of the North Central Association of Colleges and Schools if it doesn't shape up in a hurry. Ashford felt it needed to gain the WASC's blessing because so much of its online business was coming from western states. However, due to this latest report, Ashford is now in danger of being left without an accreditation to its name. Well, that's not entirely true. Even while the education standards boards were busy flunking Bridgepoint for churning and burning its students, our friends on Wall Street were offering the company their seal of approval. And no, we're not talking about Standard & Poor's or Moody's giving the company a triple-A debt rating, since they seem to only reserve that heady grade for toxic mortgage bonds. Despite the stock's shellacking, Wells Fargo analyst Trace Urdan, reiterated his outperform rating following the news, saying: "Bridgepoint shares reflect concerns regarding Ashford's viability, which we do not question." Seriously, Trace? Haven't investors already learned their lesson the hard way about this sorry education stock?