LOPE – The Educational Enron

The Multiple Smoking Guns that Prove LOPE is Using a Captive Subsidiary to Manipulate Earnings.

Citron Research is entering our 19th year of publishing independent research.  In our 19 years, we have exposed more corporate fraud than any non-government agency across the globe.  With that in mind, we are judicious when we use the “F” word.  In only the rarest of occasions do we have validation of fraud from another government agency who is investigating a public company for its operations and not the accuracy of its financials.

On September 9th, 2019, Citron wrote about Grand Canyon Education (“LOPE”) and established a $30 price target.  This target was based on an analysis of a highly competitive online education industry and the failure of LOPE to become a successful OPM.  In our presentation, we presented a slide that highlighted some red flags that LOPE might already be in violation of securities law and misrepresenting its financials (that slide is in the appendix), but it was somewhat of an afterthought as we had no proof or supporting documentation at the time.

What happened next is something that we never expected.

On November 6th, 2019 Grand Canyon University disclosed that after a 2-year application process, the Department of Education refused to grant them non-profit status.  At the time of our previous report, we did not believe that an adverse ruling on non-profit status was a potential risk as the company never disclosed it in its risk factors and sell-side assumed approval was guaranteed.