Tuesday, December 15, 2015

The K12 ship continues to go under water

Over a year ago I penned a blog (Why K12 will struggle) that stated if Agora Cyber pulled their management contract from K12 that the K12 stock would drop into the $13 range, perhaps even as low as $12. Shortly after it was announced that Agora was indeed pulling their management contract, K12's stock plummeted into that range. It is difficult to overcome a loss of 11,000+ students.

The silver lining at the time was K12 continued to provide curriculum to Agora under the new agreement reached. There was spin associated with this new arrangement but what was missed was that it was a temporary association. Within the next 2-3 years, Agora will pull their curriculum from K12 as they work to build their own (and while that is a mess, that is another story entirely).

A few months ago I wrote a blog The K12 ship is sinking and laid out some reasons why I believe they are on a steady decline.

As I write this, their stock price is $8.91 per share. My guess is they would love to see it in the $12-13 range that only a year ago was considered dismal performance.

So, what next? What does the future hold? Of course I can't say for sure but I can point to indicators:

1. Watch what happens when Agora pulls the curriculum

2. Pay attention to the potential closure of Tennessee Virtual Academy at the end of this academic year

3. Pay close attention to the California Attorney General's investigation into for-profit providers which includes K12

4. Watch for other virtual school boards either threaten to or actually pull their management contracts from K12 over the next two years

5. And, pay attention to the academic performance in Maine and North Carolina -- the narrative K12 has wanted to tell the past few years was they were in transition and now putting students first. Both Maine and North Carolina were launched with the new management in place so this will be the true test as to whether or not the transition was real or simply smoke and mirrors

Where there's smoke . . .


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