Engine Capital And Hawk Ridge Issue Open Letter To Board Of Adtalem Global Education

Rhea-AI Summary

Engine Capital LP and Hawk Ridge Capital Management LP, significant shareholders of Adtalem Global Education (ATGE), have sent a letter to the company's Board, raising concerns about an ongoing U.S. Department of Justice investigation into Walden University's nursing program. The letter highlights low graduation rates due to inadequate support for clinical experience requirements, posing potential risks of fines and loss of federal funding.

They urge the Board to clarify investigation details in the February 2 earnings call and recommend halting any financing activities regarding Walden until the investigation concludes, warning of $122 million in unnecessary costs.

Positive

• Shareholder engagement indicates active investor interest in governance.
• Potential for improved practices at Walden University if issues are addressed.

Negative

• Ongoing DoJ investigation could lead to significant fines and loss of federal funding.
• Low graduation rates at Walden University may damage reputation and financial stability.
• Risks of $122 million in unnecessary costs if financing proceeds before investigation completion.
• Walden characterized as a fundamentally inferior asset with poor revenue mix.

NEW YORK, Feb. 1, 2021 /PRNewswire/ -- Engine Capital LP (together with its affiliates, "Engine") and Hawk Ridge Capital Management LP (together with its affiliates, "Hawk Ridge"), significant stockholders of Adtalem Global Education, Inc. ("Adtalem" or the "Company")(NYSE: ATGE) with an aggregate ownership of approximately 3.9% of the Company's outstanding shares, today issued an open letter to the Company's Board of Directors (the "Board").

In the letter, Engine and Hawk Ridge share their findings regarding certain practices at Walden University's ("Walden") College of Nursing that are the likely target of an ongoing U.S. Department of Justice ("DoJ") investigation. Engine and Hawk Ridge believe that the investigation centers around the large number of Walden's nursing students that are not able to graduate because the institution has failed, in Engine and Hawk Ridge's view, to adequately help them fulfill their clinical experience requirements. Those requirements are an obligation under Walden's Program Participation Agreement with the government, which allows Walden to receive Title IV funding. This explains Walden's low graduation rates compared to its peers, and its poor reputation in the industry for enrolling too many students, many of whom have no practical pathway to graduation. This has been confirmed by multiple industry executives and senior administrators at other nursing schools, including one former Walden employee. Engine and Hawk Ridge express serious concern that Walden may face steep fines and lose federal funding, jeopardizing its continued existence, if the recently announced investigations lead to actual charges.

Engine and Hawk Ridge call on management to detail the nature and status of their own investigative efforts into Walden on the February 2, 2021 earnings call.

Engine and Hawk Ridge also urge the Board not to proceed with any potential financing activities in relation to the acquisition of Walden until the DoJ investigation has been completed, and explain how a financing today could amount to $122 million in unnecessary interest payments and fees if the Walden acquisition ultimately cannot be completed.

Finally, Engine and Hawk Ridge repeat their concern that Walden is a fundamentally inferior asset with a poor revenue mix, pointing to its consistently lagging financial results compared to Chamberlain University.

The full text of the letter to the Board can be viewed at the following link:

Letter to the Board

About Engine Capital

Engine Capital is a value-oriented special situations fund that invests both actively and passively in companies undergoing change

About Hawk Ridge

Hawk Ridge is an investment firm founded in 2005 focused on investing in high quality, misunderstood small cap equities with $2 billion in assets under management.

Investor contact:
Engine Capital, L.P.
Arnaud Ajdler
(212) 321-0048
aajdler@enginecap.com 

Hawk Ridge Capital Management, L.P.
Eric Wolff
(310) 593-7350
atge@hawkridgellc.com

SOURCE Engine Capital, L.P.

FAQ

What are the concerns raised by Engine Capital and Hawk Ridge about Adtalem Global Education (ATGE)?

Engine Capital and Hawk Ridge raised concerns regarding the low graduation rates at Walden University's nursing program, which is under investigation by the U.S. Department of Justice.

What is the impact of the DOJ investigation on Adtalem Global Education (ATGE)?

The investigation could lead to significant fines and loss of federal funding for Walden University, jeopardizing its operations.

How much could potential financing activities cost Adtalem Global Education (ATGE) before the DOJ investigation is complete?

Financing activities could lead to approximately $122 million in unnecessary interest payments and fees if the acquisition of Walden cannot be completed.

When is the earnings call where Adtalem Global Education (ATGE) will discuss the investigation?

The earnings call is scheduled for February 2, 2021, during which management is expected to detail their investigative efforts.

What do Engine Capital and Hawk Ridge suggest regarding Walden University?

They urge the Board to refrain from any financing activities related to Walden University until the DOJ investigation is concluded.