US Markets
Tuesday, January 30th, 2024 3:23 pm EDT
Key Points
- Fahmi Quadir’s Short Position: Fahmi Quadir, a well-known short seller, has targeted Adtalem Global Education, a for-profit education company with a $2 billion market cap. Quadir, through her firm Safkhet Capital, claims that Adtalem is a “toxic byproduct of an imperfect higher education system” and has a short position in the stock, indicating her belief that the share price will decline.
- Concerns about Financial Practices: Quadir raises several concerns about Adtalem’s financial practices, including allegations that the company is wasting federal tax dollars on ineffective programs. She emphasizes that over 70% of Adtalem’s revenue comes from federal student aid dollars and accuses the executives of paying themselves generously while engaging in stock buybacks. Quadir also believes that the schools in Adtalem’s portfolio are burdening students with untenable debt loads.
- Potential Risks and Criticisms on Program Effectiveness: Quadir’s report highlights various financial risks faced by Adtalem, including an investigation into Walden University’s doctoral programs by the Department of Education. She points out a lowered “financial responsibility composite score” and predicts that many of the company’s programs may fail to meet the Department of Education’s metrics for gainful employment, risking eligibility for federal student aid programs. Quadir also questions the company’s accounting practices, particularly concerning the valuation of Walden University’s eligibility for federal student loan dollars.
Short seller Fahmi Quadir, renowned for her accurate predictions in the pharmaceutical industry featured in the Netflix documentary “Dirty Money,” has set her sights on Adtalem Global Education, a publicly traded, for-profit education company with a $2 billion market cap. Quadir’s firm, Safkhet Capital, claims in a report obtained by CNBC that Adtalem is a “toxic byproduct of an imperfect higher education system.” Quadir, who holds a short position on the stock, argues that Adtalem is squandering federal tax dollars on ineffective programs, with over 70% of its revenue coming from federal student aid. She alleges that the company’s executives pay themselves generously and engage in stock buybacks. Quadir expresses concern that Adtalem is burdening students in its portfolio with unsustainable debt loads, citing graduates who claim they cannot repay their loans despite diligent monthly payments. Adtalem, formerly known as DeVry, underwent rebranding in 2017 and is the successor to the widely recognized for-profit education company DeVry Education.
The report highlights several weaknesses in Adtalem’s properties, such as Walden University’s low graduation rate of 29% and Chamberlain University’s graduation rate of 40%. Adtalem’s stock price has surged over 75% in the last seven months, reaching more than $60 per share. Quadir’s criticisms center on various aspects of the company’s financials, including allegations that Walden University is under investigation by the Department of Education for its doctoral programs. She points out that the company’s “financial responsibility composite score” was downgraded by the Department of Education, potentially forcing Adtalem to seek additional letters of credit to receive federal student loan funds. Quadir also notes that the Biden administration is reinstating the “gainful employment rule” in July, which evaluates student outcomes based on earnings and debt load. Safkhet Capital predicts that many of Adtalem’s programs will fail to meet the Department of Education’s metrics for gainful employment, risking eligibility for federal student aid programs.
Quadir questions the company’s accounting practices, particularly regarding Walden University’s assets and how it values the school’s eligibility for federal student loan dollars. Adtalem responds to each point raised by Quadir, asserting that the investigation into Walden University’s doctoral programs does not imply wrongdoing, and they are cooperating fully with the Department of Education. The company believes the majority of its programs will meet the gainful employment rule, and adjustments can be made if necessary. Regarding Walden’s intangible assets, Adtalem defends its attribution, citing Pricewaterhouse Coopers’ audit. Quadir is set to discuss her short position in a speech at a conference organized by the Managed Funds Association in Miami. Adtalem maintains that it provides quality educational programs, preparing students for gainful employment and offering a good return on investment for both students and taxpayers.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/01/30/-adtalem-targeted-by-short-seller-fahmi-quadir-nicknamed-the-assassin.html
