Monday, July 25, 2011

Bridgepoint Education (NYSE:BPI): Warburg files S-3 - 35 million shares

Bridgepoint Education (NYSE:BPI) may offer an interesting trade in the n-t after Warburg Pincus, majority owner & founder filed to sell their 35 million stake in the company.

Here's the S-3 filing

Here are some points why this may be a major event for the company:

- Bridgepoint Education Inc. (BPI) was formed in 2004 by current CEO Andrew Clark and Warburg Pincus to establish a for-profit post secondary education provider. The IPO was priced at $10.

Warburg & co can be considered 'smart money' & seeing them cash in their chips should be considered as a red flag.

- Warburg owns 34.6 million shares or about 57% of the fully diluted shares outstanding.

While short interest stands at a whopping 72% of float, the float is about get significantly larger. Current float stands around 18M shares.


I think the recent raise in BPI stock price can be attributed to a short squeeze. As you can see from the Bloomberg chart, short interest has been declining lately, while the stock has been going up.

All in all, Warburg filing is likely to have created a significant overhang for the stock in the near-term.

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