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Bridgepoint shares fall on accreditation denial

NEW YORK (AP) -- Shares of Bridgepoint Education Inc. dropped more than 30 percent Monday after the for-profit education provider said a group that certifies schools denied an accreditation for one of its institutions.

THE SPARK: Bridgepoint's Ashford University, which has a campus in Clinton, Iowa, but mostly serves online students, was denied accreditation by the Western Association of Schools and Colleges. Without accreditation, a school can lose its access to federal financial aid, which can comprise as much as 90 percent of for-profit schools' revenue.

THE BIG PICTURE: The Western Association of Schools and Colleges is one of seven regional accrediting commissions. It has jurisdiction over schools located in California. Bridgepoint is based in San Diego.

In its letter to Ashford denying accreditation, the association said it found that the university hadn't shown substantial compliance with its accreditation standards related to student retention and graduation, the alignment of resources with educational objectives and the implementation of a core of full-time faculty that can oversee the university academic policies and ensure the integrity of its programs.

WASC noted that a large number of students who start degree programs at the university drop out, most within a short period of time. It said that over the past five years, 128,000 students have withdrawn from the university, while 240,000 new students have enrolled.

In addition, the university needs to put in place an effective system for assessing student learning and an "empowered and independent" governing board that has an acceptable relationship with Bridgepoint, WASC said in its letter.

Bridgepoint, which also operates the University of the Rockies program, with a campus in Colorado Springs, Colo., said Ashford plans to appeal the ruling while reapplying for accreditation with WASC.

Ashford is already certified with another accrediting group, the Higher Learning Commission of the North Central Association of Colleges and Schools. But the company said Ashford applied to WASC because so much of its online business has moved into the geographic areas that WASC covers.

Ashford's accreditation by the Higher Learning Commission could also be at risk. Ashford must demonstrate by the end of the year that it still has a "substantial presence" in the area covered by that group. If it can't do so, the Higher Learning Commission may reconsider Ashford's accreditation.

THE ANALYSIS: Wells Fargo Securities analyst Trace Urdan backed his "Outperform" rating for Bridgepoint, saying that he spoke with company officials and believes that Ashford will likely be able to deal with its issues.

"We believe the reaction in Bridgepoint shares reflects concerns regarding Ashford's viability, which we do not question," Urdan wrote in a note to investors.

"In our opinion, Ashford's academic quality is as deserving of regional accreditation as any comparable open access institution? and while compliance with the Higher Learning Commission requirement could be costly, we do not believe either WASC or the commission would deny accreditation if Ashford were otherwise in compliance with its strictures."

THE SHARES: Down $7.22, or 33.6 percent, to $14.28 in afternoon trading. Shares have dropped about 7 percent in 2012 and are off more than 20 percent over the past 12 months.