30% Dip for Irvine Firm : NEC Stock Plunges in Heavy Trading
National Education Corp. stock plunged more than 30% in heavy trading on the New York Stock Exchange on Friday in the wake of the company’s announcement that it expects a loss for the third quarter and is having difficulty obtaining financing.
Shares of the Irvine educational services company, which had traded for as much as $28 during the past year, fell $3.75 to $8.25, registering the biggest percentage loss of any issue on the Big Board. NEC was the fifth most active stock on the exchange, with more than 1.8 million shares changing hands.
NEC has been plagued by problems at its Applied Learning division, which sells educational materials and services to corporations and which accounts for about half of the company’s revenue.
In a statement issued Thursday, NEC said it expected a loss in the range of $6 million for the quarter ended Sept. 30. It also said it is having difficulty arranging new financing and that its banks may demand repayment of unsecured loans totaling $62 million.
NEC has retained Kidder, Peabody & Co. to conduct “a strategic review of the company’s operations.” The arrival of the New York investment bank on the scene prompted speculation that the company might be seeking a buyer or that it might attempt to spin off some of its divisions.
No Comment
NEC executives were said to be in meetings all day and did not return phone calls seeking comment.
In addition to the difficulties at Applied Learning, NEC has also suffered a decline in its vocational training business. Many for-profit vocational schools have been under fire from state and federal authorities because so many of their students default on government-backed loans.
“The vocational division is not doing well, because of the low unemployment rate, new regulations and adverse publicity,” said Seth Feinstein, vice president of Newhard, Cook & Co. in Los Angeles. “A lot of banks are now hesitant to lend money to vocational schools.”
Feinstein added, however, that NEC has historically been well-managed and that it still commands a very large market share in the education business. “I believe the problem areas can be rectified,” he said, rejecting suggestions that a buyout might be in the offing.
Applied Learning was supposed to vault NEC into a leadership position in the booming corporate training market when it was formed through the merger of three acquired subsidiaries in 1987. Instead, it has been a drain on the company.
