The Dangerous Politics of Ed-Tech (Investment)
I.
A curious yet significant event in ed-tech occurred last week. A tome of some importance was released – and no, I don’t mean the publication of either Ron Paul’s or Diane Ravitch’s new book.
I’m talking about a 118-slide presentation by Whitney Tilson (PDF). The investor, hedge fund manager, early TFA member, and long-time education reform advocate gave a presentation at an investment conference: “An Analysis of K12 (LRN) and Why It Is My Largest Short Position.”
In his presentation, Tilson argues that the online for-profit, which is trading “up 122% from its 52-week low and is near its all-time high,” is not a good long-term investment, despite the company’s strong earnings per share and growth and despite bullishness on the part of most other analysts. K12 is “absurdly overvalued,” Tilson insists, “and sure to collapse” – hence his recommendation to short the stock.
He makes clear, “I am not bearish on K12 because I am short the stock. Rather, I am short the stock because I am bearish on K12.” Indeed, Tilson’s presentation is a brutally thorough demolishment of the company’s business and its educational practices:
- its targeting of at-risk students (ones that it knows are going to fail): “They will sign up anyone – as long as that warm body signs in periodically, K12 can draw enrollment money from the district. It isn’t for some noble reason – it’s because these kids demand the least amount of education.”
- its low spending on teachers ($1054 per pupil for educator salaries at K12 versus $2219 per pupil, the average for US public schools)
- its manipulation of enrollment counts, truancy numbers, and withdrawals and refusal to allow