Why Bridgepoint's Shares Got Crushed

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What: Shares of for-profit educator Bridgepoint Education (NYS: BPI) were getting failing marks from investors today, as they fell as much as 34% in intraday trading after the company's Ashford University was denied accreditation by the Western Association of Schools and Colleges.

So what: WASC gave Ashford the accreditation stiff-arm because it said the school doesn't comply with multiple WASC standards including student retention, program review, and full-time faculty. The commission studying Ashford noted that the university has had new enrollment of 240,000 over the past five years compared with 128,000 dropouts -- a level of retention it described as "not acceptable." In addition, the commission stated that "historic spending patterns [show] relatively high funding levels for recruitment compared to resources to support academic quality and student success."


Now what: This is a big deal for Bridgepoint. Ashford University is currently accredited by the Higher Learning Commission, but because of the transition of the school's student body to largely online, HLC wants Ashford to demonstrate a "substantial presence" in its region. A loss of accreditation could affect the company's eligibility for federal student aid, which is a substantial portion of most for-profit colleges' revenue.

It's too early to call this a disaster for Bridgepoint. WASC has noted that the company has been addressing the issues with Ashford and said that it's just too early to measure the effectiveness of the company's measures. And while HLC wants to hear back from Bridgepoint by Dec. 1, its next evaluation isn't scheduled until 2014-2015. So there's still time for Bridgepoint management to right the ship here, but investors will want to keep a close eye on what goes on in the months ahead.

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At the time this article was published The Motley Fool owns shares of Bridgepoint Education. Motley Fool newsletter services have recommended writing puts on Bridgepoint Education. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributorMatt Koppenhefferhas no financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting hisCAPS portfolio, or you can follow Matt on Twitter,@KoppTheFool, or onFacebook. The Fool'sdisclosure policyprefers dividends over a sharp stick in the eye.

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