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What: Shares of Corinthian Colleges (UNKNOWN:COCOQ.DL) were headed to detention today, falling as much as 18% after the SEC initiated an investigation into the for-profit university.
So what: Yesterday after hours, the SEC delivered a subpoena to Corinthian demanding documents related to areas including student recruitment, attendance, degree completion, job placement, loan defaults, and compliance with U.S. Department of Education rules. The investigation follows two subpoenas issued by state attorneys general in recent months. Recently, the Obama administration has been cracking down on for-profit colleges, many of which load up students with federal debt without leading them to jobs that allow them to repay it, and the SEC is already investigating Corinthian's peers.
Now what: Education stocks have gotten crushed in the last year amid across-the-board drops in enrollment, and revenue and profit along with it. The industry essentially functions as a commodity with no single school differentiating itself to a great degree, and Corinthian is no different, having missed EPS expectations in the last two quarters. With the negative pressure in the industry driving away students and regulatory concerns intensifying, I'd stay away from Corinthian and its peers.
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Fool contributor Jeremy Bowman has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.