Apollo Education and the SEC probe - probably no big deal
Apollo (APOL) revealed yesterday that the SEC has started an informal probe into its revenue recognition practices. The company didn't reveal specifics. The company stock is down to under $60.
However, I think the market is overly worried here. Apollo generates pretty strong cash flows. Their business model involves students paying upfront for semester-long classes. They must deal with issues of refunds for dropouts and bad debt, as this article by Street Insider indicates. It does seem like the sort of model that might lend itself to disputes over when the revenue is recognized. I doubt that the company is guilty of fraud. They might be required to restate earnings, and perhaps pay a fine, but that should be it. This is not the next Enron, folks.
Apollo has been performing quite strongly in the downturn. It has been a bit of a volatile stock, and this is probably a good time to buy.