K12 Inc. stock loses about 40% since yesterday

by David Safier

The markets are closed for the day. K12 Inc. ended yesterday at $28.59. It dropped to $17.60 at today's close, a fall of almost 40%. The primary reason is that its earnings are lower than projected, because its enrollment is lower than expected.

I don't know if this is a typical stock merry-go-round, but here's the chart of K12 stock from its beginning in December, 2007.

Screen Shot 2013-10-09 at 1.41.08 PM

The chart doesn't show today's fall, but even without that, it looks like a pretty bumpy ride. The stock fell when the market crashed in 2008 — though not as much as some other stocks, because people figured since the government was paying the tab, it wouldn't get hurt as much as many other corporations. It fell again when the stockholders sued over false information K12 gave them about student achievement, also when it was sued over problems in Florida.

In the meantime, the press has dumped on K12 Inc. all over the country, including a very critical article in the NY Times. The stock is being shorted big time by one hedge fund, and two stock analysts downgraded it today. With all those negative reports floating around, K12 may be more vulnerable now than it was in the past. It may rise from the ashes once again. If this were a just universe (which, of course, it isn't), K12 would have failed long ago due to its flawed educational model. Maybe market forces will lay it low.

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