New York Snub Limits University Of Phoenix Growth

Apollo Group Inc. (Nasdaq: APOL) owns the for-profit University of Phoenix, which operates in 29 of the 30 most populous states. Apollo describes University of Phoenix as "the nation’s largest regionally accredited private university." However, despite years of trying the university has failed to enter the state of New York.

New York has prevented the University of Phoenix from setting up a New York campus for 12 years. The state has raised concerns about the university's dropout rate, academic quality, and recruiter reimbursement policy. New York officials have even questioned whether the University of Phoenix has the right to call itself a university.

“The last thing we need to do is open a college that’s not successful,” Joseph Frey, New York’s deputy commissioner for higher education, said in a Dec. 11 interview. “I’m not bringing anything in front of the Board of Regents until I’m confident the university is playing by the rules of the U.S. Education Department and complies with our requirements.”

There is growing concern that federal authorities may follow the lead of the state of New York and take a closer look at for-profit colleges.

That concern has been priced into Apollo's share price. Shares of the company have underperformed against the S&P 500 index index (NYSE: SPY) ever since the company announced that the SEC opened an informal probe into its accounting practices. During a period that saw the S&P rise 17%, shares of Apollo were down 8.2%.