NCPA - National Center for Policy Analysis

Edison Schools Inc. to Go Public

August 3, 1999

Edison Schools Inc. -- the leading private operator of public schools in the U.S. -- has filed for an initial public stock offering with the Securities and Exchange Commission. Although it is a for-profit institution, Edison has yet to make a profit.

Investors and educators are closely watching Edison's progress, since its success or failure will influence the future of public school privatization.

  • Edison expects to operate 77 schools this coming academic year -- up from 51 last year -- and observers say it may be reaching the critical mass needed to achieve profitability.
  • Experts point out that for-profit school management is a volume business, with a company needing a base of some 75 to 100 schools before it can go into the black.
  • At present, there are about six to eight companies offering private management to public schools -- with Edison leading the group.
  • Edison reports that its methods -- which involve heavy use of information technology and a longer school day -- have raised test scores in the schools it manages.

Since it began managing public schools in 1994, Edison has experienced losses of $10 million to $14 million each year. In its offering prospectus, Edison says "we have not yet demonstrated that public schools can be profitably managed by private companies, and we are not certain when we will become profitable, if at all."

Despite that disclaimer, John McLaughlin, editor of Education Industry Report newsletter, expects the offering to be a success. He cautions, however, that "it's not going to be an Internet stock."

An estimated $350 billion in taxpayers' dollars are channeled into primary and secondary education each year. Edison's revenue from its management services climbed to $69.4 million in 1998 from $11.7 million in 1996. During the past seven years, Edison has raised an investment total of $232 million.

Source: Joseph Pereira, "Edison Schools Files to Make Initial Offering," Wall Street Journal, August 3, 1999.


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