October 27, 2021

Career Education gets slammed, CEO resigns

CECOShares of Career Education Corp plunged 42 percent to their lowest in more than 10 years on Wednesday, a day after its chief executive resigned amid findings of improper placement practices, and increased accreditation risks.

The company also reported disappointing quarterly results 10 days ahead of schedule and said the decline in new student sign-ups will not improve in the near term.

At least two brokerages downgraded the stock to their lowest rating citing too many near-term risks.

FORCED EXIT?

Though the company did not tie the placement discrepancies to McCullough’s departure, analysts say he was kicked out for that very issue.

“The compliance issues were probably the main driver behind the CEO resignation,” analyst Dobell said. “An issue with compliance and honesty, particularly given McCullough’s background, was probably more than the board was willing to tolerate and more than McCullough was willing to stand for.”

McCullough was well respected and credited for cleaning up Career Education’s reputation and streamlining its operations, according to Robert W Baird analyst Amy Junker.