Edison Schools stock plunges

Monday, May 13, 2002 | 10:50 a.m.

Edison Schools Inc., which manages seven Clark County campuses, has seen its stock plunge more than 70 percent in less than a month, raising concerns over whether the private company will survive.

Edison's stock, which was trading at $12.90 April 16, was at $2.58 earlier today.

Clark County School District officials said Wednesday the six Edison elementary schools and one middle school in the Las Vegas Valley would not be affected by the company's fiscal free fall.

"If the company went under, we would simply absorb their management functions and go back to the way things were before," said Agustin Orci, assistant superintendent of instruction for the Clark County School District.

Teachers and administrators at the seven schools are district employees, and would not lose their jobs if Edison suddenly pulled out, Orci said.

As a condition of their contract with the district, Edison had to pour $1.4 million in improvements into each of the seven schools. Bill Hoffman, general counsel for the school district, said the five-year contract with Edison requires yearly renewal, and if the company had to pull out, the district would be protected because the investment made would stay in the schools.

The New York-based company has been under fire this year for the way it operates some of the 136 schools nationwide it has under contract. The schools Edison has are largely in poor communities.

Critics of Edison decry the company's cookie-cutter approach to curriculum, using the same textbooks, instructional techniques and even daily schedules at every school. Supporters say Edison's structured environment, longer school day and emphasis on reading succeeds where public education fails.

Edison spokesman Adam Tucker called his company's stock plunge "a significant bump in the road," but not the only factor to be considered.

"What's important is that Edison's viability continues to be strong," Tucker said Wednesday. "We're in this for the long haul, and our investors know that."

Edison's stock began its tumble April 17, when the Philadelphia School Reform Commission decided to give the company a contract to manage 20 schools, instead of the expected 45. Based on that news, several analysts downgraded Edison's investment potential, sending the stock tumbling even further, Tucker said.

"Frankly, we think the market is over-reacting," Tucker said. "Stock prices are just one snapshot of a company's picture."

Edison officials expect to announce this week plans for improving the company's financial outlook, Tucker said. He said he could not comment on whether or not those plans would involve the company's seven Clark County campuses.

Founded in 1992 by entrepreneur Chris Whittle, Edison has yet to post a profit. Whittle was also the creator of Channel One, a failed venture to bring commercial television programming to public school classrooms.

"We should be taking a hard, skeptical look at any business model Chris Whittle comes up with," said Emily Heath, co-director for the Center for Commercial-Free Public Education in Oakland, Calif. "What we're seeing today is definitely a warning of things to come."