Private-prison stocks The Geo Group Inc (NYSE:GEO) and Corecivic Inc (NYSE:CXW) were up in after-hours trade amid a report that Attorney General Jeff Sessions has reversed course on an Obama administration plan to phase out federal use of private prisons. GEO shares were up 2% in Thursday’s early aftermarket trade, while CXW was up about 4%.
Sessions rescinded an August 2016 order by former deputy attorney general Sally Yates, allowing the Bureau of Prisons to use private-company facilities one more.
Said Sessions in a letter out Thursday:
“The memorandum changed long-standing policy and practice, and impaired the Bureau’s ability to meet the future needs of the federal correctional system. Therefore, I direct the Bureau to return to its previous approach.”
GEO and CXW stock were hammered last August amid the original order from the U.S. Justice Department, losing more than 35% each in a single day.
Canaccord Genuity’s Ryan Meliker pointed out at the time that “The massive falloffs in the stocks imply that the risk will spread to other federal, state and local jurisdictions. While this is possible, we believe it is unlikely. As such, we think today’s stock action is more based on fear than actual cash flow risk.”
Shares failed to plunge much further than their August reactionary lows, and steadily recovered ground as the 2016 election season played out. GEO and CXW shares jumped following President Donald Trump’s election, with analysts and investors alike optimistic that the new administration would not only roll back the Obama administration’s orders, but expand the use of private prisons as part of the president’s policy on fighting illegal immigration.
CXW shares are approaching multiyear highs, while GEO stock is sitting at an all-time peak.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.