Apparently my idea for a distance education short-selling investment club is close to a reasonable deal. What I wrote:
The major risk for a large business (such as Pearson) entering and maintaining a unit devoted to distance learning is not captured by the fact that distance education has a poor track record of effectiveness (so do textbooks, and they’re profitable!) or even that it might turn out not to be profitable. You have to factor in the reputational risk if distance learning in Idaho, Florida, or other states turns out to be rife with fraud.
What the Seeking Alpha blog entry wrote was more along the lines of investors directly in companies like K12, but struck me as a stark warning:
To this end, the growth of the student bodies themselves are a clear testament to the popularity of the school choice and charter school movement, as well as K12’s comprehensive online marketing and enrollment advisory efforts.
Just as evident, however, is another reality: the fact that these cyber schools might as well have a turnstile as their logo for the volume of withdrawals they experience…. The stark velocity of the student withdrawal rates plainly suggests, however, that something has gone terribly wrong…. There is a very good chance the company has drained the pool of the students most able to succeed in a virtual school.
Much more over on the Seeking Alpha site. Hat tip: Abby Rapoport of American Prospect.