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Stocks in Private Prisons Drop After DOJ announcement

After a statement released by the Dept. of Justice (DOJ) about phasing out the use of private prisons, stocks plummeted for both Corrections Corporations of America (CCA) and GEO Group, the two largest private prison corporations, reported Bloomberg

CCA dropped 35% on the day, the highest since their initial public offering in 1997. Shares in GEO Group dropped 40%, which is the largest drop in the company's history. However, both companies stock did see a slight rebound as it was found out that facilities under contract with the Bureau of Prisons only account for about 7% of the company's business. 

This decision has no affect over contracts with Immigration and Customs Enforcement (ICE), which falls under the jurisdiction of the Department of Homeland Security. Contracts with ICE accounted for 24% of revenue in 2015 for CCA.

In regards to the DOJ announcement, Issaac Boltansky, an analyst at Compass Point Reseach & Trading LLC wrote, "This policy shift is clearly a negative for the publicly traded for-profit prison companies, but it is far from a death sentence". 

 

 

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