K12, Inc., the virtual charter chain founded by the Milken brothers, is in big trouble, according to politico.com. Its stock is tanking, and its legal troubles growing. Its virtual charters seldom get good academic results, but a heavy investment in marketing and recruiting have kept the profits flowing. Until now. I have never liked virtual charters. I think they are a rip-off of kids and taxpayers.
Writes politico.com:
TOUGH TIMES FOR K12, INC: The nation’s largest for-profit operator of public schools, K12, Inc., has had a bumpy ride of late. Its stock closed Friday at a 52-week low of 13.82 per share, down from a recent peak of 36.78 in September 2013. What’s behind the slump? For one thing, the company’s astronomical growth has slowed significantly. Just last fall, K12 executives were projecting revenue of $987 million for fiscal year 2014. But actual revenue for the year came in under $920 million. In a conference call last week, executives projected revenues would rise only slightly in the next fiscal year.
– Meanwhile, K12’s academic empire has been in turmoil. The board of Agora Cyber Charter in Pennsylvania, which is one of K12’s largest and most profitable online schools, has signaled its intent to seek new management (though it will continue to buy digital curriculum from K12). Colorado Virtual Academy broke ties with K12 before the start of the school year. And late last week, Delaware’s state board of education voted to close another struggling school operated by K12, the Maurice J. Moyer Academic Institute. Trouble also looms in Tennessee, where Education Commissioner Kevin Huffman has ordered the K12-operated Tennessee Virtual Academy to shut down after this school year unless it shows big gains in academic performance. And last spring, the NCAA said it wouldn’t accept coursework completed at any of two dozen K12-operated schools as proof of a student’s eligibility to compete for Division I or II colleges and universities.
– To top it all off, K12 faces a trademark infringement lawsuit in Florida. The state Supreme Court last month ruled that Florida Virtual School – which was founded in 1997 – could sue K12 Inc. for opening a slew of competing online schools under the name Florida Virtual Academies. Pro Education looked at K12’s business model and examined the shaky performance of online schools in general in a series last fall:
Diane Ravitch's blog 
Fare thee Titanic fare thee well”.
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Will the U.S. Dept. of Education give K12 the same deal they gave Corinthian Colleges?
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Probably. You KNOW that K12 is “too big to fail.” (sarcasm alert!)
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Michael had an 80’s nickname I believe: Michael “Milk Them” Milliken. So apropos.
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This story is reminiscent of the then named Edison Schools which went public in 2001 and opened at around $40 per share. Within a year, their academic record was so dismal and so many contracts were cancelled that the stock value dropped to under a $1. This was the organization that founder Christopher Whittle (remember him?) claimed in the 1990s that his company would operate a thousand schools but missed the mark by well over 800. Without the boondoggle called No Child left Behind whose unreachable standards opened the door to remedial educational services, Edison would likely have gone out of business. Richard Ognibene
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Whittle operates the for-profit Avenues schools now – he’s still at it.
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Let’s hope the charters fight each other and deplete their resources. Then, they will be too busy to consume more public schools with their vulture capitalist ideas.
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The real fun begins when the stock plunges into OTC land, and nobody is held accountable. This has happened before, and the K12 line graph is a predictor in this case. History repeats itself, tragedy, then farce, then in the land of John Galt and “edupreneurship”…
Those who have been watching such things closely for a long long time may remember when there was a stock called EDSN, traded on the NASDAQ. EDSN was the symbol for “Edison Schools…”, which was actually a pump and dump scam pushed by Chris Whittle and a few cronies, with the help of the (then) Governor of Pennsylvania and the (then) “Reform Supt.” of Philadelphia (Paul G. Vallas). The key to the (brief) success of EDSN was the scandalous corruption of those at the major investment firms that rated stocks. EDSN was a STRONG BUY from Merrill Lynch (this was long before Merrill Lynch went belly up into Bank of America for other corruptions) as the stock price tumbled from the low 30s into the teens over a few days. It kept going down, while Merrill continued to recommend that investors BUY. Finally, as the stock went into single digits, Merrill stopped promoting Chris Whittle’s corporation. I covered that scandal (EDSN wound up a penny stock, traded over the counter) and called Merrill and talked to the young lady who was rating EDSN, and caught up with her the day she had to finally stop telling people it was a good idea to buy EDSN. She was actually crying when I asked her why she didn’t lower her rating on EDSN sooner, and she told me it was sooo saddd that Chris Whittle’s “Noble Vision” was being trashed this way. Blah. Blah. Blah…
Real tears.
You can’t make this stuff up. She was crying her best John Galt tears, repeating how Whittle’s “vision” was being besmirched and stuff…
Whittle and a couple of cronies got out when the stock was peaking in the low 30s, as SEC filings later showed. Some other investors got out before it went below $1 a share. But most regular investors got hosed, including, if memory serves right, the Florida Teachers Pension Fund, which at that time was controlled by guys appointed by Jeb Bush.
Nobody was ever indicted. Whittle had begun his career scamming with “Channel One” and just continued into “serial entrepreneurship” in the “education business.” At every point, he was able to buy off a few famous cronies with stock (and warnings when to get out) and scam the general public (with the help of guys like Paul Vallas in Philadelphia back then).
Deja vu all over again, only this time with William Bennett (still being quoted as having famously and racistly said, “Chicago’s schools are the Worst in America” — later the name of a “Chicago Tribune Book”..) and K12, it’s like a remake of one of those old Halloween slasher movies. As long as these guys can get the ratings for their scams, the scams will continue.
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I was told 25% of K12’s US revenue comes from two states; Ohio and Pennsylvania.
Ohio and Pennsylvania have become the dumping grounds for ed reform garbage. It’s a real betrayal by the lawmakers in these states, who are apparently too corrupt to care anymore.
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Ouch. At least Illinois has not been sucker punched by that one. Now… about that mess in Philadelphia (which began when EDSN authored the “reform” plan)…
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Instead, we just have CPS BoE authorizing hundred thousand dollar investments into the concept schools …
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Thanks you, Karma.
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