Analysts covering San Diego-based Bridgepoint Education Inc., which owns the for-profit college Ashford University, reacted positively to Ashford’s recent announcement to withdraw its appeal for accreditation.
This came after Bridgepoint announced recently that it will cut 450 jobs in San Diego and Denver and reassign 400 more employees to other positions aiming to address concerns cited by the Western Association of Schools and Colleges.
The WASC, which accredits schools in California and Hawaii, reportedly denied Ashford’s application this summer to switch from its current accreditor, the Higher Learning Commission, which certifies colleges in the Midwest, citing unacceptable dropout rates. It also said Ashford spends more money on marketing than education.
First Analysis Securities Corp. analysts Corey Greendale and David Warner reiterated in their Bridgepoint Education report that Ashford had a ‘low probability’ of winning the appeal given the number of issues raised by the WASC.
“Bridgepoint indicated Ashford instead intends to focus on its reapplication for accreditation by WASC (expected filing Oct. 11, 2012), which we view as a more productive use of its time and resources,” the analysts wrote.
Greendale and Warner gave Bridgepoint’s stock an “equal-weight” rating with expectations that Ashford will ultimately retain regional accreditation. If that happens, the analysts reported, Bridgepoint’s stock will prove to have been undervalued at current levels. However, the analysts remain cautiously optimistic.
90,000 Online Students
“Uncertainty around the impact of accreditation-driven changes on Bridgepoint’s future enrollment and earnings keeps our rating at equal-weight,” the analysts wrote.
As of now, Bridgepoint’s Ashford University remains accredited by the Higher Learning Commission of the North Central Association of Colleges and Schools.
According to news reports, Ashford sought to switch accreditations, because the commission requires that a significant portion of an education institution’s administration, business operations and executive leadership be based in its region.
Accreditation is critical to Bridgepoint, because it is required by federal law to participate in federal financial aid programs.
Last year, Bridgepoint reportedly received more than 85 percent of its $933 million in revenue from federal student aid programs.
The WASC’s denial of accreditation also led the Higher Learning Commission to investigate whether Ashford is in compliance with its guidelines.
Ashford will need to resolve concerns by both agencies in the coming months.
Meanwhile, the analysts expect the Higher Learning Commission will conduct an advisory visit at Ashford University during the week of Oct. 22.
December Deadline
Ashford has a Dec. 1 deadline to submit its plan on how to meet the commission’s policy.
Next February, the commission’s board of trustees will determine whether to accept Ashford’s plan; and in June 2013, the WASC is expected to give its vote on whether to grant Ashford initial accreditation, the analysts predicted.
“If HLC accepts Ashford’s implementation plan and WASC denies the university’s second application, the school must immediately relocate its operations so as to comply with HLC’s “substantial presence” requirement,” the analysts wrote.
Ashford’s restructuring plan aims to address issues raised by both accreditation bodies.
In a written statement, Bridgepoint said that roughly 200 recruiters have been reassigned to positions within a new department of Student Inquiry, which works with prospective students to ensure they are ready for college-level courses. Another 200 recruiters have been reassigned to the Student Services department to help address concerns of new and existing students.
“Ashford University is committed to providing its students with the best opportunity to succeed, and to that end, a reorganization of Ashford’s student-facing staff has been implemented with the goal of improving student retention and academic success,” said Marianne Perez, media relations manager for Bridgepoint in a written statement.
Jeffrey Silber, an analyst who covers Bridgepoint for BMO Capital Markets, expects the move will potentially help boost margins.
“No cost savings information was provided,” Silber wrote in his recent flash report.
He added, “Some of these changes could help address issues cited by the Western Association of Schools and Colleges when it denied Ashford’s application to switch accrediting bodies.”
Silber has a “market perform” rating on Bridgepoint’s stock.
Marion Webb is a freelance writer for the San Diego Business Journal.