K12 Inc. Tries to Pivot from Virtual School Failures to Profit from "Non-Managed" Schools

Submitted by Dustin Beilke on January 7, 2016 – 9:01am

If you were a public school and Wall Street didn’t like you that might not seem like such a big deal. What do financiers know about educating children? It’s a big deal, however, if you are K12, Inc., and enticing investors to buy into your low-cost, high yield "cyber school" idea is key to your bottom line.

At K12, Inc.’s stockholder meeting in December, its own investors criticized the schools’ lamentable academic performance and voted down its executives’ proposed salary increases. This is just the latest piece of bad news, which has been coming in rafts for K12 since 2013.

As K12’s executives were being rebuffed by stockholders inside the law offices of Latham & Watkins, in Washington, D.C., outside K12 was picketed by members of the California Teachers Association for more or less the same list of educational shortcomings, as Diane Ravitch noted.

Some editorial boards crow when they receive criticism from two opposing sides of a controversial issue. "If both sides are unhappy we must be doing something right" is the familiar refrain, as if there are only ever two sides to an issue or the sides have equal merit.

In the case of K12, however, it is hard not to wonder how much longer the company can withstand this loud unanimity of animus–even a firm Wall Street insiders like convicted fraudster Michael Milken helped launch, as the Center for Media and Democracy (CMD) detailed in "From Junk Bonds to Junk Schools: Cyber Schools Fleece Taxpayers with Phantom Students and Failing Grades."

No major supporters have yet publicly called for pulling the plug, but anti-public education zealots like the billionaire Walton family and the Koch brothers have plenty of other places to invest in to try to bring down "government schools."

Big, Big Payouts to Execs at Taxpayer Expense

In its recommendation that shareholders vote against the pay proposal, the advisory firm Glass Lewis & Co. said K12 exemplifies a "substantial disconnect between compensation and performance results." Glass Lewis gave the company an "F" for how it paid its executives compared to peers.

In 2015, K12 CEO Nathaniel Davis was making $5.3 million and CFO James Rhyu was making $3.6 million. Their base salaries were $700,000 and $478,500, respectively, which were dwarfed by additional pay and stock for their "performance." (See more details on their total compensation in the pdf uploaded below.)

In all, K12’s five highest paid executives received a total of more than $12 million in compensation last year. That’s one of the reasons CMD has called K12 Inc.’s former CEO, Ron Packard, the highest paid elementary and secondary school educator in the nation.

Nearly 90% of K12’s revenues–and thus its huge pay for executives</a–<comes from Americans' state or federal tax dollars.

K12 Inc. also pays each member of its Board of Directors between $155,000 and $216,000 annually for a few hours of work each year—far more than local school board members make for much more time spent in general. (See uploaded K12 proxy filings below for the details.)

While K12’s promoters love to mention that it is a publicly traded company, it is also trading at its lowest stock price since 2010, down 75 percent from its September 2013 peak.

Meanwhile, a new report from Stanford University’s Center for Research of Education Outcomes (CREDO) found that online charters do a very poor job of educating children. In general, students in online charters lose 42 days of reading in a year, and 180 days of instruction in math. And there are only 180 days of instruction in most public school years.

Enrollment has also dropped almost 5 percent from its peak. No less a business authority than Bloomberg Business investigative reporter John Hechinger presented grim prospects for K12 as of late 2014, and no one has revised them upward.

Millions in K12 Ads at Taxpayer Expense Too

This decrease in business has come despite massive advertising and marketing expenditures by the virtual schools industry. K12 has spent untold millions in public funds on ads—a luxury budget item that traditional public schools are not permitted even when competing with K12 for students.

It spent at least $20 million on ads in 2012 alone, but it has not publicly disclosed ad spending in recent years even as its ads have become more ubiquitous in markets like Wisconsin and Arizona, for example. K12 does not disclose its ad budget in its public annual report.

Plus Taxpayer Money Helps K12 Pay to Play with ALEC Politicians

K12 also spends taxpayer money lobbying state and federal officials. It recently got a seat, for example, on the corporate board of the American Legislative Exchange Council (ALEC), where for years it has also paid for a seat and vote on ALEC’s "Education and Workforce Development" Task Force, which advances a "cash for kids" lobbying agenda.

ALEC corporations spend tens of thousands of dollars each year for such access to lawmakers, and K12 has also paid many thousands of dollars to underwrite some of ALEC’s docket of events for legislators and lobbyists.

Through the ALEC Task Force, K12 has actually had an equal vote with state legislators on so-called "model" bills to divert taxpayer funds away from traditional public schools toward the objectives of ALEC’s private sector funders, to help their bottom-lines and/or legislative agenda.

ALEC’s "Virtual Public Schools Act," for example, even allows virtual schools to be paid the same amount per pupil as traditional public schools even though operations like K12 have no bricks and mortar school house or desks or air-conditioning or gyms, etc., to maintain.

As CMD’s SourceWatch has documented:

"In 2004 when the ‘model’ bill was drafted and approved, both K12 Inc. and Connections Academy were part of the ‘School Choice Subcommittee of ALEC’s Education Task Force, according to an archived version of ALEC’s website from February 2005. The subcommittee recommended six bills for adoption, including the ‘Virtual Public Schools Act.’ According to ALEC, the bill was drafted by Bryan Flood of K12 along with Mickey Revenaugh of Connections Academy, then-Colorado Representative Don Lee (now a lobbyist for K12, see [below]), ‘and the rest of the Subcommittee.’" (Connections is now part of Pearson PLC, a British mega-corporation headquartered in London.)

K12’s reps at ALEC Education Task Force meetings have been its Senior VP for Government Affairs (lobbying), Bryan Flood, along with its VP for Government Affairs, Don Lee, and its Senior Director of Government Affairs, Bob Fairbank.

ALEC’s Education Task Force is co-chaired by Utah state Sen. Howard Stephenson (R-11). Through the ALEC corporate bill mill, Stephenson has even done a roadshow with K12’s Don Lee to drive more business to K12 through legislation. Given his advocacy of efforts to divert tax dollars from traditional public schools to charters and virtual schools, some press in Utah have questioned whether Stephenson is a public servant or a lobbyist for outside interests. (There is no way to independently verify whether Stephenson has actually ever invested in K12 or Pearson, or not.)

Notably, Lee and Fairbank are both former Colorado state legislators who took the revolving door out of public service into well-paid gigs, like peddling what K12 is selling to legislatures across the country. And, the head of their lobbying shop, Flood, is the former flack for then-Gov. John Engler of Michigan, who is now pulling down big bucks for sitting on K12’s Board of Directors: $55,000 in cash plus $100,000 in K12 stock for a few hours of his time last year.

Making "Friends" Everywhere K12 Goes….

Utah, Arizona, and Wisconsin are not the only states where K12 is active and facing criticism. The "Ohio Virtual Academy," for example, which accounted for 10 percent of K12’s revenue in 2014, received failing grades on a state report card for student test-score progress and graduation rates. A state analysis found that only 37 percent of K12’s Ohio ninth graders earned diplomas within four years.

K12’s operations in California have produced similar results, as In the Public Interest (ITPI) has documented, despite K12’s efforts to blame the state. (CMD has partnered with ITPI on research previously.)

Several online charters have cancelled their contracts with K12, and in Tennessee, education commissioner Kevin Huffman called for shuttering the Tennessee Virtual Academy because it had test results "in the bottom of the bottom tier" and is an "abject failure."

Altogether, K12 has lost management contracts or been threatened with school shutdowns in five states.

The National Collegiate Athletic Association (NCAA) also ruled last April that prospective students from 24 K12 Inc. high schools can no longer count credits toward athletic scholarships.

A pro-union decision by the California Public Employment Relations Board no doubt came as more bad news for K12’s brass. The board ruled that the California Teachers Association (CTA) is the exclusive bargaining agent of the more than 750 teachers at the Simi Valley-based California Virtual Academies (CAVA). Teachers have been seeking a stronger voice in improving working conditions and student learning for CAVA’s 15,000 students.

CAVA teachers had been calling for improvements for years. In March 2015 a study of CAVA by ITPI called for better oversight. In June 2015, CTA filed complaints with school districts that authorized CAVA charters throughout California.

K12 Hoping "Non-Managed" Schools Will Save It?

While no one is publicly calling for K12 to shut down, K12 itself is "diversifying its portfolio" in an apparent effort to ease out of the online charter school business.

K12 has built its brand by operating "managed schools" in which K12 runs and profits from all of the programs at a particular K12 school. In a managed school, the company does all of the teaching, curriculum, assessment for the customers—er, students—who choose it over attending a public school or participating in a traditional home-schooling arrangement.

The new revenue stream K12 is pioneering is in what it is now calling "non-managed schools" in which K12 sells the digital content and platform for a school for some other company or entity to run (and be responsible for the results). Non-managed programs have been growing by leaps and bounds as managed virtual schools have fallen on hard times.

The only problem with this model is that managed schools still bring in much more money than the non-managed kind. Some managed schools, for example, bring in $1,849 per student while non-managed schools bring in only $462 per pupil on average.

But, getting some revenue without being responsible for results may be the way for the future of K12: an analysis of K12 figures comparing September 2015 to the prior year showed that enrollment at "managed" virtual schools was declining 12 percent while it is increasing 34.5 percent at "non-managed" schools.

Non-management could take profiting from taking money out of traditional public schools without real accountability to a new level for K12.

CMD’s Executive Director Lisa Graves contributed research to this report.

k12inc 2.pdf

K12 Inc. Deploys D2L’s Brightspace Across High School, Middle School and Fuel Education

KITCHENER, ON–(Marketwired – August 11, 2016) – D2L, a global learning technology leader, today announced that K12 Inc., one of the largest virtual schools in the U.S., is continuing to expand the use of the Brightspace LMS. Following a successful rollout to thousands of students across the country enrolled in K12’s high school, K12 is now making Brightspace available to thousands more middle school students.

In addition, K12’s Fuel Education will use Brightspace for the distribution of its curriculum. Fuel Education will begin rolling out Brightspace in December with a full rollout scheduled for the first half of 2017.

D2L’s Brightspace platform was embraced by K12 due to a fundamental distinction: Brightspace delivers a personalized learning experience, not the one-size-fits-all model utilized by traditional LMS offerings. Brightspace was designed with modern students in mind and offers a clean, responsive user experience as well as integrated social media, game-based learning, chat and advanced video features. The new Brightspace Daylight experience lets students and teachers use smartphones, tablets or any browser-enabled device, eliminating barriers to learning. Teachers also favor Brightspace because engagement data — offered via real-time learning analytics </strong–< can help them improve student outcomes.

“D2L’s customers such as K12 Inc. care deeply about the educational experience and want a more personalized, engaging learning platform to help each learner learn their own way,” said John Baker, CEO of D2L. “Brightspace is an easy, flexible and smart LMS that was built from the ground up to do exactly that. We are very pleased that K12 and Fuel Education learners will benefit from this personalized approach and learn on their own terms to achieve their academic goals. We look forward to continuing to broaden the scope of our partnership.”

“Our goal in considering a new LMS was to improve student engagement, retention and outcomes while advancing our effort to deliver a more mobile-ready curriculum,” explained Lynda Cloud, Executive Vice President of Products at K12 Inc. “After thorough evaluation, K12 chose D2L to power K12’s next-generation online high school and middle school. The Brightspace platform has enabled us to provide students, learning coaches, and teachers with an innovative, engaging and collaborative learning experience that puts tools and resources right at their fingertips. Parents find that both they and their students have better visibility into what students need to do each day, allowing them to spend more time learning.”

D2L’s track record of innovation has been widely recognized. In March, Fast Company ranked D2L #6 on the Most Innovative Companies of 2016 list in the Data Science Category, amongst Google, IBM, Spotify, Costco, and Blue Cross Blue Shield. eLearning Magazine recently rated D2L as #1 in Adaptive Learning, and Brightspace was recently named the #1 LMS in Higher Ed by Ovum Research.

To learn more about Brightspace, visit http://www.d2l.com/products/learning-environment/.


K12 Inc. (LRN) is driving innovation and advancing the quality of education by delivering state-of-the-art, digital learning platforms and technology to students and school districts across the globe. K12’s award winning curriculum serves over 2,000 schools and school districts and has delivered more than four million courses over the past decade. K12 is a company of educators with the nation’s largest network of K-12 online school teachers, providing instruction, academic services, and learning solutions to public schools and districts, traditional classrooms, blended school programs, and directly to families. The K12 program is offered through K12 partner public schools in approximately two-thirds of the states and the District of Columbia, and through private schools serving students in all 50 states and more than 100 countries. More information can be found at K12.com.


Fuel Education™ partners with school districts to fuel personalized learning and transform the education experience inside and outside the classroom. The company provides innovative solutions for pre-K through 12th grade that empower districts to implement successful online and blended learning programs. Its open, easy-to-use Personalized Learning Platform, PEAK™, enables teachers to customize courses using their own content, FuelEd courses and titles, third-party content, and open educational resources. Fuel Education offers one of the industry’s largest catalogs of K–12 digital curriculum, certified instruction, professional development, and educational services. FuelEd has helped 2,000 school districts to improve student outcomes and better serve diverse student populations. To learn more, visit getfueled.com and Twitter.


D2L’s Brightspace is a digital learning platform that helps schools and institutions deliver personalized learning experiences in a classroom or online to people anywhere in the world. Created for the digital learner, Brightspace is cloud-based, runs on mobile devices, and offers rich multimedia to increase engagement, productivity and knowledge retention. The platform makes it easy to design courses, create content, and grade assignments, giving instructors more time to focus on what’s most important – greater teaching and learning. At the same time, analytics reports track and deliver insights into the performance levels of departments, courses, or individuals.


D2L is the software leader that makes learning experiences better. The company’s cloud-based platform, Brightspace, is easy to use, flexible, and smart. With Brightspace, organizations can personalize the experience for every learner to deliver real results. The company is a world leader in learning analytics: its platform predicts learner performance so that organizations can take action in real-time to keep learners on track. Brightspace is used by learners in higher education, K-12, and the enterprise sector, including the Fortune 1000. D2L has operations in the United States, Canada, Europe, Australia, Brazil, and Singapore. www.d2l.com

© 2016 D2L Corporation.

The D2L family of companies includes D2L Corporation, D2L Ltd, D2L Australia Pty Ltd, D2L Europe Ltd, D2L Asia Pte Ltd, and D2L Brasil Soluções de Tecnologia para Educação Ltda.

All D2L marks are trademarks of D2L Corporation. Please visit D2L.com/trademarks for a list of D2L marks.

K12 upgraded to Overweight By First Analysis

August 10, 2016 10:01 am

Writer: Camille Ainsworth

Posted In:

US Broker Ratings

In an analyst rating update on Wednesday shares of K12 (NYSE:LRN) had their rating upgraded by analysts at First Analysis.

The broker said it has now set a ‘Overweight’ rating on shares of K12 with a price target of 14. The price target according to the broker shows a possible increase of 23.35% from the current stock price of 11.35.

Over the last twelve months K12’s share price has decreased from 14.88 to 11.35, changing by -23.72%.

The companies 50 day moving average is 12.68 and its 200 day moving average is 11.16. The 52 week high K12’s shares have peaked at is 15 whilst the 52 week low for the company’s shares is 7.11.

K12 has 37,492,000 shares which are currently outstanding with a price of 11.35 calculating K12’s market capitalisation to 425.53M USD .

K12 Inc. (K12) is a technology-based education company. The Company offers curriculum, software systems and educational services designed to facilitate individualized learning for students in kindergarten through 12th grade (K-12). It provides a range of technology-based educational products and solutions to public school districts, public schools, virtual charter schools, private schools and families. The Company offers a set of products and services primarily to three lines of business, which include public school programs, which consists of managed programs and non-managed programs, Institutional Sales, which includes educational products and services sold to school districts, public schools and other educational institutions that it does not manage and international and private pay schools, which consists of private schools. The Company offers a range of learning applications, which include mobile learning, interactive games, virtual labs, e-book and digital book distribution.

INVESTOR ALERT: Investigation of K12 Inc. Announced by Law Offices of Howard G. Smith

August 03, 2016 10:30 AM Eastern Daylight Time

BENSALEM, Pa.–(BUSINESS WIRE)–Law Offices of Howard G. Smith announces an investigation on behalf of
investors of K12 Inc. (“K12” or the “Company”) (NYSE: LRN)
concerning the Company and its officers’ possible violations of federal
securities laws.

online charter schools had significantly weaker academic
performance in math and reading, compared with their counterparts in
conventional schools.”

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On October 27, 2015, Stanford’s Center for Research on Education
Outcomes (“CREDO”) published a study concerning online charter schools
that specifically mentioned K12. Based on their findings, CREDO stated
that “online charter schools had significantly weaker academic
performance in math and reading, compared with their counterparts in
conventional schools.” Additionally, that same day, K12 revealed that it
had received a civil investigative subpoena from the Attorney General of
California on September 24, 2015.

Over the next three days, K12’s stock price fell $0.54 per share, over
5%, to close at just $9.71 on October 30, 2015.

If you purchased K12 securities, have information or would like to learn
more about these claims, or have any questions concerning this
announcement or your rights or interests with respect to these matters,
please contact Howard G. Smith, Esquire, of Law Offices of Howard G.
Smith, 3070 Bristol Pike, Suite 112, Bensalem, Pennsylvania 19020 by
telephone at (215) 638-4847, toll-free at (888) 638-4847, or by email to howardsmith@howardsmithlaw.com,
or visit our website at http://www.howardsmithlaw.com.

This press release may be considered Attorney Advertising in some
jurisdictions under the applicable law and ethical rules.


Law Offices of Howard G. SmithHoward G. Smith, Esquire215-638-4847888-638-4847howardsmith@howardsmithlaw.comwww.howardsmithlaw.com

Law Offices of Howard G. Smith

Release Summary

INVESTOR ALERT: Investigation of K12 Inc. Announced by Law Offices of Howard G. Smith


Law Offices of Howard G. SmithHoward G. Smith, Esquire215-638-4847888-638-4847howardsmith@howardsmithlaw.comwww.howardsmithlaw.com

Glancy Prongay & Murray Announces the Filing of a Securities Class Action on Behalf of K12 Inc. Investors and Encourages Investors to Contact the Firm

July 20, 2016 02:33 PM Eastern Daylight Time

Prongay & Murray LLP
(“GPM”) announces that it has filed a class
action lawsuit in the United States District Court for the Northern
District of California on behalf of investors who purchased K12 Inc.
(“K12” or the “Company”) (NYSE: LRN)
securities between November 7, 2013, and October 27, 2015,
inclusive (the “Class Period”). K12 investors have sixty days from
the date of this notice
 to file a lead plaintiff motion.

Investors suffering losses on their K12 investments are encouraged to
contact Lesley Portnoy of GPM to discuss their legal rights in this
class action at 310-201-9150 or by email to shareholders@glancylaw.com.

The complaint filed in this lawsuit alleges that throughout the Class
Period, Defendants made materially false and/or misleading statements,
as well as failed to disclose material adverse facts about the Company’s
business, operations, and prospects. Specifically, Defendants made false
and/or misleading statements and/or failed to disclose: (1) that K12 was
publishing misleading advertisements about students’ academic progress,
parent satisfaction, their graduates’ eligibility for University of
California and California State University admission, class sizes, the
individualized and flexible nature of K12’s instruction, hidden costs,
and the quality of the materials provided to students; (2) that K12
submitted inflated student attendance numbers to the California
Department of Education in order to collect additional funding; (3)
that, as a result of the aforementioned practices, the Company was open
to potential civil and criminal liability; (4) that the Company would
likely be forced to end these practices, which would have a negative
impact on K12’s operations and prospects, and/or that K12 was, in fact,
ending the practices; and (5) that, as a result of the foregoing,
Defendants’ statements about K12’s business, operations, and prospects,
were false and misleading and/or lacked a reasonable basis.

If you purchased shares of K12 during the Class Period you have sixty
days from the date of this notice
to ask the Court to appoint you as
lead plaintiff if you meet certain legal requirements. To be a member of
the Class you need not take any action at this time; you may retain
counsel of your choice or take no action and remain an absent member of
the Class. If you wish to learn more about this action, or if you have
any questions concerning this announcement or your rights or interests
with respect to these matters, please contact Lesley Portnoy, Esquire,
of GPM, 1925 Century Park East, Suite 2100, Los Angeles California 90067
at 310-201-9150, Toll-Free at 888-773-9224, by email to shareholders@glancylaw.com,
or visit our website at http://glancylaw.com.
If you inquire by email please include your mailing address, telephone
number and number of shares purchased.

This press release may be considered Attorney Advertising in some
jurisdictions under the applicable law and ethical rules.


Glancy Prongay & Murray LLP, Los AngelesLesley Portnoy,
310-201-9150 or 888-773-9224shareholders@glancylaw.comhttps://www.glancylaw.com

Glancy Prongay & Murray LLP

Release Summary

Glancy Prongay & Murray Announces the Filing of a Securities Class Action on Behalf of K12 Inc. Investors and Encourages Investors to Contact the Firm


Glancy Prongay & Murray LLP, Los AngelesLesley Portnoy,
310-201-9150 or 888-773-9224shareholders@glancylaw.comhttps://www.glancylaw.com

Latest Editorial Proves The Wall Street Journal Will Defend Almost Any For-Profit Education Company

The Wall Street Journal continued its streak of defending for-profit schools with track records of questionable practices and “abysmal results,” this time shifting its focus away from fraudulent for-profit colleges to attempt to sugarcoat the failing online charter company K12 Inc.

The virtual charter school company K12 Inc. recently reached a $168.5 million settlement with the state of California following an investigation into the company’s marketing and management practices. At the same time, the state’s Education Department has announced an audit of a California virtual charter network managed by K12. The Wall Street Journal’s editorial board was, once again, ready to dismiss facts and defend the for-profit education company against what the board views as a politically motivated attack, baselessly claiming that recently substantiated allegations against K12 are “trumped up.”

The California state investigation into K12, launched by state Attorney General Kamala Harris, alleged that the company had engaged in a number of misleading advertising practices about the quality of its online schools, pushed unfair contracts on public charter partners, and inflated student attendance numbers in order to receive more state funding. It was spurred, at least in part, by a whistleblower report and complaints from educators formerly employed by a California charter network managed by K12. Educators at the K12-managed network moved to unionize in 2014, citing excessive workloads and inability to “effectively advocate for students without the threat of retaliation or job loss.”

An investigative series at the San Jose Mercury News earlier this year concluded that K12’s network of schools “is failing key tests used to measure educational success,” that K12-affiliated “teachers have been asked to inflate attendance and enrollment records used to determine taxpayer funding,” and that the companyexploits charter [and] charity laws for money.” An online education expert explained to The Mercury News that K12 “has shown an inordinate level of failure, yet it’s continually given lifelines by policymakers who have irresponsibly ignored what’s going on.”

Yet the Journal contended that another audit of K12’s management practices “looks trumped up” in a July 17 editorial. Complaining about K12’s settlement with the state of California, the editorial board characterized the investigation of K12 as part of a larger “coordinated assault” on for-profit colleges and education companies and claimed that “Democrats are ambushing” the virtual charter school company. According to the editorial board, the further audit of K12 means “Thuggish government marches on.”

The disastrous results of K12’s schooling model have also been well-documented in media investigations and in research from left-leaning and right-leaning organizations. A New York Times investigation raised red flags about K12’s practices as early as 2011, concluding about the company:

A look at the company’s operations, based on interviews and a review of school finances and performance records, raises serious questions about whether K12 schools — and full-time online schools in general — benefit children or taxpayers, particularly as state education budgets are being slashed.

Instead, a portrait emerges of a company that tries to squeeze profits from public school dollars by raising enrollment, increasing teacher workload and lowering standards.

A 2011 Washington Post report singled out K12’s early lobbying efforts and political contributions, pointing to limited data on the effectiveness of virtual charter schools even as the company successfully opened up state markets for its products through political involvement. In 2012, PolitiFact concluded that a Tennessee politician’s assertion that K12’s results were “the bottom of the bottom” was true.

The most recent reports from Mathematica Policy Research, Stanford University’s Center for Research in Education Outcomes, and the Center on Reinventing Public Education concluded that “students of online charter schools had significantly weaker academic performance in math and reading, compared with their counterparts in conventional schools.” BuzzFeed News’ coverage of the reports concluded that “Both Sides Of The Education Debate Are United In Scorn” for online charters like K12 due to “abysmal results” for students.

But K12 has the corporate and conservative credentials to warrant a healthy defense from The Wall Street Journal.

K12 Inc., until recently, called itself a “proud” member of the corporate-driven bill mill American Legislative Education Council (ALEC), which has pushed virtual schools legislation that would create greater demand for products like those produced by K12. K12 has also contributed financially to the Foundation for Excellence in Education, a pro-privatization think tank founded by Jeb Bush that also frequently touts digital learning tools in its policy recommendations. The majority of K12’s executives hail from the corporate world or from other for-profit education companies, and the head of K12’s “curriculum and products organization” previously spearheaded product development at Pearson Publishing.

The Journal has a long history of defending the sometimes indefensible when it comes to for-profit educational companies, often relying on violent analogies to make its point.

The paper stood by shuttered for-profit college chain Corinthian Colleges, even as the company faced multiple state and federal investigations related to its allegedly fraudulent marketing practices and its efforts to facilitate predatory private lending. In fact, the Journal’s editorial board characterized the numerous investigations, launched because of consumer complaints, as “political revenge” by “California job killer” Kamala Harris and a “drive-by shooting” and “contract hit” by the Obama administration. In April 2015, as the company closed its last remaining campuses, The Wall Street Journal wrote a “last rites” editorial lamenting that “the feds and Kamala Harris put 16,000 students on the street.” The now-defunct company has been held legally responsible for its practices, with several investigations and legal actions concluding that Corinthian had, indeed, misled its students about job placement rates and private loan terms, and that former students were owed debt relief.

The Journal has also repeatedly characterized efforts to address these types of fraudulent practices at other for-profit institutions as “regulatory assault,” a “ploy to win over millennials,” a “contract hit” (again), and a political “stealth attack” akin to “drone strikes,” dismissing evidence that these types of schools have taken advantage of veterans and servicemembers, as well as other innocent students, on the taxpayers’ dime.

Option Market: K12 Inc Risk Hits An Elevated Level

K12 Inc (NYSE:LRN) Risk

Date Published:



This is a proprietary risk rating for the next 30-days built by Capital Market Laboratories (CMLviz) based on a large number of interactions of data points, many of which
come directly from the option market for K12 Inc (NYSE:LRN) .

Risk as reflected by the option market has hit
a slightly elevated level relative to the company’s past. The option market reflects a 95% confidence interval stock price range of
($11.90, $15.00) within the next 30 calendar days.


The short-term risk for a stock is reflected in the option market by a measure called the 30-day implied volatility or IV30®.
The IV30 is the risk reflected by the option market in the stock price for the next 30 calendar days — it’s forward looking.
K12 Inc shows an IV30 of 50.1%, which is a slightly elevated level for the company relative to its past.

The option market for LRN has shown an IV30 annual low of
38.6% and an annual high of 72.8%, meaning that LRN is at the 34% percentile right now. Here’s a table of the data before we dig into the risk rating further.

Current IV30    
Low IV30    
High IV30   
50.1% 38.6% 72.8%

01020304050607080Current IV30Low IV30High IV30

The option market reflects less risk in the next 30 calendar days for K12 Inc (NYSE:LRN) than on average.

Further, if we look backwards, the stock has a realized 30-day historical volatility, called the HV30, of 39.03%.

We have an unusual situation now where the IV30 is depressed relative to the past, but even with that risk pricing, the option market reflects the likelihood of a greater stock movement in the next 30-days than the stock has realized in the last 30-days.

Let’s turn to a chart to see what’s going on.

 0510152025303540455055Next 30 DaysLast 30 Days

Note how much higher the future risk for K12 Inc is priced (50.1%) compared to what happened just in the last 30-days (39.0%).

K12 Inc Risk Rating

The LRN risk rating is at 3.5, where the rating goes from one (the lowest risk) to five (the highest risk). The driving factors for the 3.5 rating are:

↪ The IV30 is below the annual average.

↪ The IV30 is above 50%.

↪ The HV30 is below the 20th percentile.

↪ The IV30 is above the HV30.

↪ The stock has moved +33.0% over the last 3-months which does indicate some elevated risk.


Understanding short-term risk is important, but it is not the silver bullet of investing. At Capital Market Labs we identify thematic trends that will revolutionize our futures and the companies that will benefit most from them to find the “next Apple” or the “next Google.” Our research sits side-by-side with Goldman Sachs, Morgan Stanley and the rest on professional terminals, but we are the anti-institution. Our purpose is to break the information monopoly held by the top .1%.
Each company in our ‘Top Picks’ is the single winner in an exploding thematic shift like artificial intelligence, Internet of Things, drones, biotech and more. In fact, here is just one of the trends that will radically affect the future that we are ahead of:

Virtual reality is one of the fundamental shifts coming in the very near future that will change how we live, work, and play. This is a technology whose consumer base looks increasingly like all of humanity. This is the opportunity so many investors say they welcome – that say they search for. The opportunity to find the “Next Apple,” or the “next Google.” Friends, it’s coming right now, and it lies in the depths of technology’s core. It’s not artificial intelligence, it’s artificial super intelligence and there is one company that will rule all of it.

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K12 Inc. Announces New Online Private School Scholarship

Company to award five full-tuition scholarships to K12 International Academy for 2016-17

HERNDON, Va., July 19, 2016 /PRNewswire-USNewswire/ —K12 Inc. has announced that a new merit-based scholarship is available for students interested in attending its private online school. The K12 Private School Scholarship is designed to support economically disadvantaged high school youth who have demonstrated academic success and seek a more rigorous and individualized educational experience. The Scholarship Committee will award a one year, renewable scholarship to a total of five recipients that will cover the cost of tuition, books and support services at K12 International Academy.

"I am delighted to announce this scholarship, which reflects our mission to put students first," says Stuart Udell, CEO of K12 Inc. "Online learning is uniquely well suited to the motivated student who wants more out of their education. This scholarship will help remove any barriers related to financial means for the recipients."

K12 International Academy is an accredited online private school for full- and part-time students. Operating since 2008, K12 International Academy utilizes the award-winning K12 curriculum and offers students a choice from more than two hundred and forty online courses to suit their interests and goals. K12 teachers customize lesson plans to create an individualized learning experience for their students.

Course offerings include multiple versions of core online high school courses, an extensive array of electives including world languages and even Career Technical Education classes designed to give students a head start on their career goals by earning technical and specialty trade credentials, college credits, and workplace experiences. The school also offers a wide range of clubs, activities and organizations.

The K12 Private School Scholarship is valued at $6,995 a year and is renewable for up to $28,000 over 4 years. Five scholarships will be awarded annually based on a combination of merit and families’ financial circumstances. In addition to the tuition grant, scholarship recipients will be eligible for the following:

  • Laptop computer during enrollment
  • Books and materials
  • An extensive support team of teachers, academic coaches, and counselors.

Scholarship students will also be assigned a mentor who will meet regularly with the student to assist with the transition to online learning and provide additional support.

All students who attend a public, private, or charter school or who are homeschooled are eligible for consideration based upon their completed application to K12 Inc., which must be received no later than August 5, 2016. Students must have a GPA of 3.0, must be a rising 9th grade student and must be a U.S. citizen residing in the United States. Additional documentation demonstrating financial need may be required from applicants.

For more information about the K12 Private School Scholarship, including how to apply, details of the selection process and documentation requirements, visit http://www.icademy.com/k12-international-academy-scholarship

About K12 Inc.K12 Inc. (NYSE:  LRN) is driving innovation and advancing the quality of education by delivering state-of-the-art, digital learning platforms and technology to students and school districts across the globe. With nearly a half-billion dollars invested in developing award winning curriculum, K12 serves over 2,000 schools and school districts and has delivered more than four million courses over the past decade. K12 is a company of educators with the nation’s largest network of K-12 online school teachers, providing instruction, academic services, and learning solutions to public schools and districts, traditional classrooms, blended school programs, and directly to families. More information can be found at www.K12.com or on Facebook.

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Company with ties to NC virtual school accused of misleading parents in California

Posted 4:53 p.m. yesterdayUpdated 5:57 p.m. yesterday

Raleigh, N.C. — A company with ties to a North Carolina virtual charter school has reached a multimillion-dollar settlement with the state of California over claims it manipulated attendance records, misled parents and overstated the academic progress of students at its online charter schools in that state.

The Virginia-based, for-profit company K12 Inc. has admitted no wrongdoing but will pay $8.5 million to California as part of the settlement.

K12 helped start the North Carolina Virtual Academy, a taxpayer-funded online charter school that launched last year and serves about 1,400 students at any one time. The company provides the school with curriculum and other materials but does not operate the school, according to NCVA’s head of school Joel Medley.

NCVA is governed by a board of directors made up of local community leaders, parents and state educators who oversee academics, staffing and other items for the school. Medley said it’s unfair to compare NCVA to K12-affiliated schools in other states.

“We’re not California. We need to be careful with generalization,” he said, noting that states have different laws and policies for how online charter schools are run. “This has had no impact on us. We’re continuing to do business as normal.”

North Carolina debuted two virtual charter schools last AugustNCVA and North Carolina Connections Academy, which has ties to Pearson, a London-based education company. The schools were launched as part of a four-year pilot program to determine whether virtual charters can succeed in North Carolina.

Their first year has been marked with questions about their high student withdrawal rates. In March, a report to the State Board of Education found that about 500 students, or about 26 percent of those who had signed on to take courses, had withdrawn from each school in the first five months of operation.

Virtual charter school leaders, including Medley, say those numbers are misleading because some students plan to take online classes for only a brief period.

In a letter to state school board members in March, Medley said “higher withdrawals are not a testament to a virtual school’s quality but rather the nature of the online model.” He pointed to virtual schools in other states, including Florida, which he says have higher withdrawal rates.

He urged people to be patient with NCVA.

“With this being a pilot, we’ve got four years. Give us four years,” he said. “Give it time.”

Craig Barrett Makes $190,000 As a K12 Inc. Board Member


By David Safier

on Mon, Jan 11, 2016 at 2:30 PM

click to enlarge

Over the years, I’ve written many posts about the shoddy corporate practices and poor student performance at schools run by K12 Inc., the for-profit, publicly traded online education corporation (Its Arizona charter school, Arizona Virtual Academy, has 4,600 students sitting behind their computers at home, if, that is, they actually take the time and effort to log in and do the work). I wrote my most recent post about the corporations’s sinking stock value a few weeks ago. And I’ve written a few times that Arizona’s Craig Barrett sits on K12 Inc.’s Board of Directors. But this is the first time I’ve written about his compensation. For the fiscal year 2015, Barrett received $190,000 from the corporation. Barrett is a very, very busy man with his fingers in a whole lot of pies. You can be certain he didn’t put in 40 hour weeks to earn his Board pay.

Why, you may ask, should we care about Barrett’s involvement in K12 Inc.? The answer is, Barrett is a powerful voice in Arizona education, advocating for what he says are necessary reforms to improve our schools. He’s not shy when it comes to talking about his connections and accomplishments. For instance, he’s happy to announce that he’s President and Chairman of BASIS Schools, Inc., the for-profit Education Management Organization that runs the chain of BASIS schools. But so far as I know, he never talks about his connection to the shoddy, failing K12 Inc. I’ve looked hard on the internet, read his op eds, listened to some of his interviews and speeches. When it comes to K12 Inc. — nothing but crickets. A man as proud of his accomplishments as Barrett should be more open about this aspect of his educational life, and more forthcoming about what he, as a board member, is doing to improve the corporate and educational culture at K12 Inc.

Craig Barrett’s list of connections and accomplishments is vast. He’s the retired CEO of Intel, and he’s worth hundreds of millions of dollars. As I mentioned earlier, he’s President and Chairman of BASIS Schools Inc. He’s also a board member of Achieve, Inc., which was instrumental in creating and promoting the Common Core standards, as well as an influential member of any number of education-related organizations. He travels around the world promoting STEM education (Science, Technology, Engineering, Mathematics), and he’s very outspoken about what he thinks is wrong with Arizona education and what should be done to fix it. His ideas fall squarely in the privatization/”education reform” camp. During Jan Brewer’s governorship, he chaired her Arizona Ready Education Council which worked to steer the state’s education priorities, most of which are being carried forward by Gov. Ducey’s Classrooms First Initiative Council. It’s fair to say he’s the most powerful unelected individual in Arizona education.

So if he sees himself a good-education advocate, especially an outspoken one who touts the successes of BASIS schools as a model for other schools, he should feel a duty to explain the way his $190,000 a year position on the K12 Inc. board is part of his commitment to improving education in Arizona and nationwide. Maybe there’s more value in the corporation’s online school model, which has been so regularly and roundly criticized, even from people within the “education reform” movement, than we know. Maybe he’s working inside the corporation to improve its operations and education delivery system. A man as well spoken as Barrett, a man who writes as well as Barrett, a man who can command a public forum as easily as Barrett, should really make an effort to explain this questionable aspect of his educational involvement.

BASIS BOARD MEMBER Bonus News:  How much does Craig Barrett make as President and Chairman of BASIS Schools Inc.? I don’t know, because it isn’t a matter of public record. BASIS Schools Inc. is a for-profit Education Management Organization, so, though nearly all of its income is taxpayer money which the state gives to its charter schools, once the money that flows from the state budget to charter schools is sent upstairs and hidden behind a for-profit pay wall, it disappears from view. We don’t know if Barrett and other board members are paid, and if so, how much. We have no idea how much money BASIS founders Michael and Olga Block make. We used to know back when BASIS was entirely nonprofit and the Blocks had to report their salaries on the nonprofit’s publicly available 990 tax forms, but no more.

But it’s interesting to see who sits on the board of BASIS Schools, Inc. Of course, there’s Craig Barrett, a man whose political and educational priorities lean conservative. And there’s co-founder Michael Block, who has worked as a consultant for ALEC (the American Legislative Exchange Council), an organization whose main mission is to create conservative legislation which can become state law across the country. Also sitting on the seven member board is Clint Bolick, whom Gov. Ducey just appointed to the Arizona Supreme Court. Bolick is currently the head of the Goldwater Institute’s constitutional litigation team. Another board member, Terry Sarvas, is a member of the Goldwater Institute, and yet another, Steve Twist, is a founder of the Goldwater Institute.

BASIS’s conservative credentials run wide and deep — which is fine, of course, perfectly acceptable, but well worth noting.

Tags: Craig Barrett, K12 Inc., BASIS Schools, Inc., Arizona Ready Education Council, Classrooms First Initiative Council, Michael Block, Clint Bolick, Terry Sarvas, Steve Twist, Image



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I am sure if you ask the BASIS bunch to work for nothing to support select student success, they would. After all the 1100 local PUBLIC school board members in 223 publically elected and transparent school districts in Arizona, DO work for zero dollars.

Posted by

Frances Perkins

on 01/12/2016 at 7:54 AM

It’s time for more transparency in the Charter for profit school industry. After all these are taxpayer dollars, how much is spent in the classroom vs. profit? Who knows ?
I worked as an engineering consultant for many years most often on public projects. We had to disclose, salary info, overhead rates, cost data, profit and so forth. Why? Because public money was involved.

Posted by

Michael S. Ellegood

on 01/12/2016 at 8:29 AM

Sound like Mr. Barrett has set himself up with a pretty substantial retirement at taxpayers expense. I do not need to give you a lesson in civics but in order to put a stop to this rape of state revenues is very simple. A small change in the leadership of the State Senate. Senator Marco Rubio is absolutely correct when he defends himself for missing sessions of the United States Senate. Notwithstanding the rules of the U. S. Senate it’s a numbers game, it is not the number of NOs that pass legislation, it is the number of Yes votes. While it is true he is collecting pay for being a Senator, if he is going to vote NO, so what if he isn’t there. It is the 51 YES votes that passes legislation. Why is this important? Here in Arizona it is 31 Yes votes in the State House and 16 Yes votes in the State Senate. Right now the State Senate is split 17 Republican State Senators and 13 Democrats. That means a change of only four state senators and the control of the State Senate shifts to the Democrats. The committee majorities would be Democrat and the flow of legislation would be in the hands of the New Democrat power structure. That means without the approval of the State Senate no budget, no new laws or changes to current laws could take place. Before anything goes to the Governor for a signature to become law BOTH houses of the legislature must be in agreement. Getting back to Mr. Barrett and publicly fund education systems, no money would flow, no formula of distribution could be decided until the 16 Democrats in control of the State Senate voted YES. See how powerful only a change of four State Senators would be. With one or the other bodies of the State Legislature in control of the Democratic members, things could and would get done, but the name of the game then would be compromise. Working together to draft bills that could pass both house and then be sent to the Governor to become law. The Governor could of course veto the legislative action, then more compromise would be necessary to craft legislation but it sure would beat the five or six legislative kingpins dictating budget and other public decisions from a broom closet of the State Capitol Building which by the way doesn’t even belong to the state anymore. One state senate change to start with would be in Legislative District 11, North Pima and Pinal Counties. State Senator Steve Smith with his radical ideology desperately needs to be replaced. A very qualified and highly experienced in public affairs candidate has stepped forward named Ralph Atchue. Mr. Atchue is currently Secretary/Treasurer of the Casa Grande Democrats
club. There is one recommendation only three to go. Wow, sounds simple doesn’t it, instead of tax cuts for the rich and powerful special interests, a new day, taxpayer funds invested in Arizona families and especially our kids. Educated and job trained citizens to bring economic prosperity to a flourishing and thriving Arizona.

Posted by


on 01/12/2016 at 8:38 AM

$190K. Nothing close to the annual comp K12’s CEO tried to shovel pass the shareholders…

Posted by

Susan A Smith

on 01/12/2016 at 9:19 AM

This is the first time I have ever seen a salary of a charter school administrator published. Since charter schools are taxpayer funded, it would be good to see all administrative salaries published every year with the same formal transparency as public schools. Back to 1994 would be even better, whether the school failed, or whether the administrator retired with a golden parachute of his/her own design. When you read and watch mainstream news reporting administrative overhead not only as a percentage but also in dollar amounts, why have “reporters” refused to report charter salaries for so many years?

Posted by


on 01/14/2016 at 8:27 AM

David Safier wrote a short article about the “real” Craig Barrett in 2013 including this
“… by Barrett, who stays under the radar except when he helped campaign against Prop 204, the one cent sales tax for education. But his real power isn’t in swaying public opinion. It comes from whispering in Governor Brewer’s ear and steering the legislature toward adopting his educational ideas ie:
Don’t add a penny to K-12 school funding. Freeze it right where it is, even though we’re spending about 20 percent less than five years ago and we’re near the bottom of the nation in per-student funding.
Send more money to charter schools. That, of course, would mean less for district schools. And districts can forget about trying to pass bonds or budget overrides. Those funding options would be wiped out. But charters would still be able to float bonds to build new schools. So if Arizona’s student population goes up, districts would have no way to handle the overflow, and charters would be more than happy to step in and fill the void.
Set teacher salaries based on student performance, not experience or education. Those lucky teachers in high-performing, high-rent districts could expect their salaries to climb at the expense of teachers in low-income areas. And schools, like teachers, would get performance bonuses, meaning those same high-rent districts would find themselves with extra cash while districts with low-income students who need the most resources would see their allotments shrink. And if any district slips into failing territory, the state would take it over. No extra money would go along with the takeover, just loss of local control.”
Now we are dealing with Prop123, that will lead to the death of public instruction in our state.

Posted by

on 01/14/2016 at 1:12 PM


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