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Why is Grand Canyon Education Inc (LOPE) Stock down?

28 Dec, 2023:

Grand Canyon Education Inc (LOPE) stock dropped by 6.36% due to a lawsuit filed by the Federal Trade Commission (FTC) against Grand Canyon University (GCU), owned by Grand Canyon Education, for-profit corporation that owned and operated GCU. Here are the key reasons for the stock's decline:

  • FTC Lawsuit: The FTC filed a lawsuit against GCU, Grand Canyon Education (GCE), and Brian Mueller, the president of GCU and CEO of GCE. The lawsuit alleges that GCU deceived prospective PhD students about the cost of its doctoral programs and misrepresented the university's status as a nonprofit.
  • Nonprofit Status Dispute: While GCU received nonprofit status recognition from the IRS in 2018, the Education Department continued to consider it a for-profit university. The FTC alleges that GCU and GCE advertised GCU as a nonprofit while continuing to operate as a for-profit entity, which raised concerns and led to legal action.
  • Misrepresentation of Program Costs: The lawsuit alleges that GCU and GCE told prospective PhD students that the total cost of its "accelerated" PhD programs was equal to the price of 20 courses, while in reality, students were required to take additional "continuation courses" that incurred additional expenses.
  • Abusive Telemarketing Practices: The FTC also alleges that the defendants engaged in marketing practices that resulted in numerous abusive telemarketing calls to individuals who had requested not to be contacted. These practices added to the legal issues faced by GCU and GCE.
  • Previous Fines and Investigations: In October, the Education Department fined GCU $37.7 million, its largest-ever penalty, following an investigation that found the university had misled over 7,500 students about the cost of its PhD programs. This previous fine and ongoing investigations likely contributed to negative sentiment surrounding the stock.
  • Denial and Defense: GCU denied the allegations in the lawsuit and characterized them as part of a coordinated effort by the Biden Administration to target institutions with which it disagrees ideologically. The university vowed to refute the allegations. In summary, Grand Canyon Education Inc (LOPE) stock dropped by 6.36% due to the FTC lawsuit, ongoing disputes regarding GCU's nonprofit status, allegations of misrepresentation of program costs, abusive telemarketing practices, and previous fines and investigations. Investor concerns about the legal challenges and their potential impact on the company's reputation and finances likely contributed to the stock's decline.
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