Shares of Santa Ana-based for-profit school operator Corinthian Colleges Inc. slumped Thursday, a day after a key rival withdrew its 2011 financial forecast and warned of a big drop in students as new federal regulations for the industry unfold.
It’s the latest bad news for battered Corinthian, which closed down 18% to a market value of about $420 million.
On Wednesday, Arizona’s Apollo Group Inc., operator of the University of Phoenix and the largest for-profit school company by students, pulled its outlook for the 12 months through August 2011.
Apollo also forecast a potential 40% drop in new students in the current quarter.
Shares of Apollo closed down 23% to a market value of $5.6 billion.
Apollo, Corinthian and other for-profit school operators are under fire from regulators, legislators and investors for students who took on more debt than they could afford.
The companies have spent the past several months dealing with proposals from the Education Department that would fall hard on for-profit schools.
The proposed rules, which would take effect next year and in 2012, would curb recruiting and potentially cut off students at some schools from federally back loans.
Corinthian runs more than 100 campuses in the U.S. and Canada that offer degrees in healthcare, criminal justice and other areas.
The company gets the bulk of its revenue from students with federal loans.
Earlier this week, Corinthian’s president and chief operating officer, Matt Ouimet, said he’s leaving at the end of the month to pursue other opportunities.
Corinthian has no immediate plans to fill Ouimet’s posts.
On Tuesday, an analyst for Switzerland’s UBS AG issued a report with a “neutral” rating on Corinthian, saying the stock was “cheap, but too risky for our taste.”
Corinthian’s Everest schools “generate cash but could be potentially shut down by the government,” said Ariel Sokol of UBS.
“We expect the stock to remain quite volatile in 2011,” he said. “We are less clear about the value of the company’s Everest institutions, given both existing and proposed regulations that could significantly restrict new start growth.”
