For Profit Prison Stocks Crash On Announced Phase Out

When the Washington Post this morning reported plans by the US Justice Department to end contracts with private prison operators, the stock prices of such operators took a tumble. GEO Group REIT (GEO), for instance, was down nearly 40% on the day, closing trading at $19.51. Corrections Corp of America (CXW) was down even more, shedding 46% of its value. Concaccord | Genuity, for its part, had a buy rating on GEO as early as August 10, looking for a $38 price target.

The highly criticized private prison program, accused of mistreating inmates and extending prison terms to increase its sales figures, was greeted with joy from political activists.

“Today’s announcement is a welcome move that has shaken the perverse notion of profiteering from imprisonment,” said Daniel Carrillo, Executive Director of Enlace, convener of the National Prison Divestment Campaign. “The Prison Divestment movement has pushed investors to realize that profit extracted from suffering is morally and financially a dead-end strategy. Financial backers like Wells Fargo and Bank of America are increasingly being called out for their role in investing in and lending to private prisons. The 40% drop in stock price that Corrections Corporation of America and GEO Group have seen today is the beginning of the end of prison profiteering.”