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ITT Educational Services, Inc. (ESI), Rovi Corporation (ROVI): Activists Launch Proxy on One, Slash Stake in the Other

Blum Capital’s latest slashing of its position in ITT Educational Services, Inc. (NYSE:ESI) follows similar a similar move in late 2014, as it cut its stake down to 1.85 million shares at the time, from the 2.0 million shares it held previously. Moreover, throughout 2013,the stake was reduced from 3.34 million shares at the start of the year, to 2.30 million shares held by the end. ITT Educational Services, Inc. (NYSE:ESI) was one of just five positions held by Blum Capital in its equity portfolio at the end of 2014, though the portfolio was nonetheless valued at over $578 million.

It has not been a case of taking profits from the position for Blum Capital, a fund that was founded in 1975 and is based in San Francisco. Instead, the fund has been slashing its position despite shares deteriorating over the past five years, losing 94% of their value. Nor have they fared any better over the last one-year period, dipping by 75.18%.

Much of ITT Educational Services, Inc. (NYSE:ESI)’s woes began in May, 2010 at the Ira Sohn Conference, when Steve Eisman, former hedge fund manager of the now defunct Frontpoint Partners and Emrys Partners, took aim at ITT and other private colleges for their dubious practices. Eisman declared them “seamy mortgage brokers”, and urged the department of education officials to investigate the way in which the schools recruited and gave loans to students. The Obama administration eventually found that ITT and other institutes had indeed abused government-loan programs.

Despite its downward spiral, ITT Educational Services, Inc. (NYSE:ESI) has more than 15 hedge funds (among those we track) with long positions in its company. Robert Joseph Caruso’s Select Equity Group is the largest among them as of the end of 2014, with ownership of 2.26 million shares.

Disclosure: None