Should a short seller testify on for-profit colleges?
Leaders of the for-profit education sector are questioning Congress for calling a short seller -- someone who profits from a stock's decline -- to testify in a hearing Thursday.
Steven Eisman is a portfolio manager at FrontPoint Financial Services Fund in New York, a hedge fund manager. He's listed to speak at a hearing titled "Emerging Risk? An Overview of the Federal Investment in For-Profit Education."
The hearing is part of a larger regulatory push to curb abuses in the for-profit sector, which has been widely accused of using high-pressure sales tactics and false promises of prosperity to load up students with debt.
Short sellers sell borrowed assets, then repurchase those assets and return them to the lender. They profit from a decline in the value of the assets between sale and repurchase.
One way short sellers make money is by targeting assets they deem overvalued. Short sellers have been front and center in the recent debate about for-profit higher education, helping journalists, lawmakers and other potential critics understand the industry's vulnerabilities. Unlike the lawmakers and journalists (we hope), the short seller stands to gain if for-profit stocks decline.
(Those stocks include Washington Post Co., which owns the for-profit Kaplan University.)
"Eisman's comments should be vigorously examined with an understanding that a short seller's aim above all else is to make money on the decline of stocks," the Career College Association said in a statement.
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Daniel de Vise
June 23, 2010; 10:07 AM ET
Categories: For-profit colleges , Public policy | Tags: career college assocation, congressional hearings for-profits, congressional investigation for-profits, for-profit colleges, for-profit higher education
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