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BMO Capital downgraded K12, Inc.’s stock (NYSE: LRN) yesterday, on account of slowing enrollments. Shares of the stock tumbled on the news, down 25 percent at the start of trading this morning and down 35 percent as this story was posted 40 minutes after the market opened.

K12, Inc. is a Virginia-based for-profit company that runs online schools in 32 states and attributes nearly 85 percent of its income to public dollars.

The company has been trying to break into the North Carolina market by opening a virtual charter school, but their bid thus far has been unsuccessful.

K12 has run into numerous problems recently, with school districts dropping their partnerships with the company, news of teachers lacking certification, and instances of very low graduation rates.

Just last week, news surfaced of a K12 school outsourcing the grading of student essays to workers in Bangalore, India.

In a press release, K12 explained the slowed enrollment growth:

We believe the increase in Managed Public School enrollments fell short of internal expectations due to several factors, which include, among others:

–The Companys inability to convert the increased volume of student applications into enrollments at a level achieved during previous years due to performance in its enrollment centers and, to a lesser extent;

–The delayed start of the open enrollment period for certain schools.

Managed Public School first quarter enrollments were 5.7 percent over enrollment numbers this time last year, short of expectations.

Revenue is projected to come in between $905 million and $925 million, below the anticipated target of $988.5 million.

There’s a lot of education news this week, so here’s a roundup of happenings for your Tuesday morning.

Guilford County suspends tablet program

A significant number of defective tablet computers has forced Guilford County Schools to suspend their highly anticipated technology initiative that would put tablets in the hands of thousands of middle school students.

GCS spent more than $3 million in federal Race to the Top funds on the one-to-one technology initiative. Amplify supplied the 15,000 tablets, of which thousands developed broken screens, came with unsafe chargers causing tablets to melt, and students reported problems with cases.

Read the News & Record’s story here.

K12, Inc. outsources student essay grading to India

The Idaho Virtual Academy, operated by K12, Inc., outsourced thousands of student essays for grading by reviewers in India, reports Idaho Education News.

This isn’t the first time K12, Inc. has been outed for outsourcing instructional work to laborers outside of the U.S.

K12 said this was just a pilot program to offer teachers more support. Another K12 teacher in Pennsylvania discussed how she was overwhelmed trying to grade the papers of the 300 students she was assigned for just one term.

State Board of Education member calls for increasing teacher pay to the national average

Veteran school board member John Tate called for a resolution at last week’s school board meeting to raise teacher pay to the national average.

Board chair Bill Cobey called his move out of order and tabled it for discussion at next month’s meeting.

North Carolina was in the middle of the pack for teacher pay as recently as 2008, according to the National Education Association. Today the state ranks 46th in the nation.

Are Charter Schools a Threat to Traditional Public Schools?

This WFDD story considers the conflict between state support of charter schools and the needs of the public school system in advance a WFDD-hosted community forum on school choice, charters and vouchers.

The forum is tonight at 7 p.m. at the Kulynych Auditorium in the Wake Forest University Welcome Center.

Election Day school bond

It’s Election Day, and the contentious $810 million Wake School bond is on the ballot for voters to decide on today. The bond would provide funds to build new schools, renovate others and provide for improved technology as the district looks forward to increased population growth.

Opponents of the bond question the accuracy of the county’s enrollment projections and worry that residents will be burdened by both the 10-percent property tax increase and the additional debt they’ll incur if the measure passes.

The News & Observer has loads of coverage on the bond issue here.

K12 logoThe Wall Street sharks who want to buy up our public education system do not appear inclined to go away quietly. After being rebuffed by state education officials and failing thus far to get what they want in the courts, K-12, Inc. (the troubled, for-profit, “virtual” charter school company) has turned to what it undoubtedly expects will be a more hospitable  forum — the General Assembly.

As N.C. Policy Watch reporter Sarah Ovaska reported yesterday afternoon, K-12 lobbyists have prevailed upon a state lawmaker to enter legislation that would put the company on the path to open its proposed online charter in North Carolina. For people who care about public schools, this should be a very worrisome development. This is from Ovaska’s report: Read More

K12, Inc., the for-profit online virtual school company that made a bid to open up a statewide school in North Carolina, plans on settling claims that it misled investors.

The proposed settlement would not require the company to admitting wrongdoing, butK12a would pay investors $6.75 million, according to a preliminary settlement draft in federal court records and obtained by Education Week.

Education Week reports that the lawsuit’s claims about academics and quality would be dismissed and the settlement would stick to allegations about how the company disclosed information about student enrollment and retention.

The investor lawsuit came after a series of negative attention and press accounts questioning whether K12, Inc. (NYSE: LRN) was more focused on profits than educational quality. The lawsuit itself claimed that top officials of K12, Inc. misled the public and investors by downplaying questions about the schools’ educational quality. (Click here to read more about the lawsuit’s initial filing.)

The company has the largest share of the online schooling market, running public schools in 30 states where students from kindergarten through high schools take classes through programs on their home computers while parents act as “learning coaches.”

The company prides itself on offering alternatives to families seeking alternatives for their local school systems, but schools run by the company have low graduation rates and performance outcomes. In Tennessee, where legislators approved the virtual school in 2010 after concerned push from K12 lobbyists, state education officials have found only 16 percent of the 3,200 students in the K-8 program performed at grade level in math.

The company had made a push to open up a statewide virtual charter school in North Carolina in 2011 and 2012 by partnering with Cabarrus County Schools (which would get a kickback for agreeing to host the virtual school) but the State Board of Education, which authorizes charter schools in the state, did not consider its application. The matter is now held up in the appeals court.

Since then, the State Board of Education passed a more stringent application process for virtual charter schools, cutting back on the per-student reimbursement and requiring that graduation rates are within 10 percent of the state average (which is up to 80 percent).

N.C. Learns, non-profit organization put together by the company filed a letter of intent that it intended to apply to open for the 2014-15 school year, but did not submit an application by Friday’s deadline, according to a list of 70 prospective charter schools kept by the N.C. Department of Public Instruction.

(Another online company, Connections Academy, did submit an application to open up a statewide virtual school in the fall of 2014. Connections is owned by Pearson, an international education company (NYSE:PSO).)

K12 could still get a chance to educate North Carolina students (and get a slice of North Carolina public education funding). Legislation creating virtual schools could appear this year, with top state leaders like Gov. Pat McCrory expressing interest in the virtual school.

Here’s another tidbit about K12, Inc., the publicly-traded company trying to open up a virtual charter school in North Carolina.

K12, (NYSE:LRN), the largest virtual education company in the nation, spent $21.5 million in the first eight months of 2012 advertising the online public charter schools it operates in 29 states, according to an article that ran yesterday in USA Today. (My colleague Chris Fitzsimon also made mention of that in his Friday Follies column today).

That’s a decent amount to spend on advertising, especially considering that 85 percent of the company’s revenue comes from public sources. Click here to read more about the ad buys, and how USA Today calculated the estimates.

Lots of ads ran on kid-friendly media outlets, including Nickelodeon, The Cartoon Network and MeetMe.com, a social media site used by teens (and tweens).

The company also may be trying to tap into the disaffected youth market – it spent $3,000 to advertise on VampireFreaks.com, which bills itself as “the Web’s largest community for dark alternative culture,” according to the USA Today article.

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