One thing is for sure. Someone sure got the inside information on the CIDC notice sent to ESI on May 18th. That day ESI shares fell $1 and fell another $0.57 the next day. ESI then filed 8K on May 20th stating that the notice was received on 5/18 and the shares fell $1.94 that day and are down another $2 today. All combined, that is a -10% move (a much larger move down than any of the other leading education companies - APOL shares are up and DV is down only 5%). And all of this for a general "inquiry" regarding all the participants in all aspects of making and servicing private student loans.
One thing is for sure. Insider traders have a direct line into Washington DC as it pertains to education companies. This is not the first time that I have seen price action well in advance of some news release from the government on the education sector.
I am not sure why ESI shares are down any more than $1 -$2 at all on this. The news is basically a non-event. The inquiry will take forever and come up with nothing. I also am not sure why ESI shares are down so much more than the other education companies, particularly when they are 1) buying back so much stock than the other companies and doing so more aggressively and 2) the valuation of ESI is 40% below that of the other education companies already.
I think that my problem is simple. I am trying to use logic and reasonable thought process in something where neither are applicable.
Ox, come'on, there's no manipulation or insider info. You saw all of the 13-F filings showing instutional selling in the 1st quarter - well before any CIDC notice. A net decrease of over 6 million shares! You think they've stopped selling in the 2nd quarter? The simple reason is the fundamentals are deteriorating and stock is still overpriced.
I was referring to the last 6 days of trading, that's all.
Regarding the selling in the first quarter, ESI shares started the year at $56 and change. The shares rose to $75, a stunning 35% gain, at their February 17th peak. The share then closed the quarter at $66, a first quarter gain of 18%. I certainly understand why there would be some players that sold into this sizable up move in the first quarter. The first quarter gains were excellent.
However, during the first quarter it was on February 27th that APOL dropped its earnings downgrade on the market and those shares fell from $51 to 43 in one day. APOL shares have since then declined to $32. On the day that APOL lowered its guidance and the next day, ESI fell a combined $6 per share ($74 to $68). The APOL announcement sent fear through the marketplace regarding education stock earnings - including me. It wasn't until April 25th that ESI was to report its first quarter earnings and so for the two month period from late February (APOL's announcement) and late April (ESI's announcement), ESI's shares sold off to $59.50 (this price being two days before the ESI q1 earnings announcement as speculation that ESI would disappoint rose and APOL's shares themselves continued to fall).
ESI then on its earnings announcement reported eps that were not below estimate, but actually 12% ahead of estimates and the company raised its 2012 earnings guidance from $8.00 - 8.50 per share to $8.50 - $9.00 per share. They furthermore indicated that these earnings projections did not factor in further share buybacks and that the company had already in the first two weeks of the second quarter had repurchased nearly 1 million additional shares. In other words, ESI will most likely again be raising its earnings guidance again for 2012 when it reports second quarter figures. In addition, even after beating estimates handily, current analyst estimates were raised only from $7.95 to just $8.53 per share for 2012. Every analyst is at the low end of the range, as they were in the first quarter and as they were for every quarter all last year. We are just simply repeating same pattern as how things unfolded last year. Also in the quarterly conference call management also stated that student enrollment numbers were showing better signs given the number of applications and student acceptances so far.
ESI shares clearly did not drop in the first quarter because institutions were net sellers. The stock went up significantly in the first quarter, regardless of what the institutions did. The decline in the shares in late February and since was not a result of any negative change in ESI's business relative to widely published estimates and expectations relative to other education companies - eg APOL. In fact, the results again have been well ahead of expectations. If you believe that this is a recipe for a correction due to overvaluation, then you got one on me. ESI shares trade at a mid single digit level, the balance sheet is awesome, free cash flow per share exceptional, and results are again ahead of what people have projected. I will readily admit that the company's business is down from the late 2010/early 2011 levels, but it is not down anywhere near what the bears have been projecting for the past two years.