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The Beginning of the End for Controversial For-Profit Charter Schools

For years, the core business of the education company K12 Inc. has been mired in controversy. The company essentially invented the business of operating for-profit virtual charter schools, using public education funds to run free online elementary and high schools in 29 states — and to generate millions of dollars of profits.

K12 schools became known for dismal academic results, high turnover rates, and profit-maximizing tactics that involved charging school districts for students who left the school within months. A 2011 New York Times investigation into the company, which K12 strongly disputed, was followed by a major shareholder lawsuit, causing the company’s stock to plummet. Investor Whitney Tilson, an outspoken advocate of education reform, announced that K12 was his largest short position, releasing apresentation that detailed a raft of further violations by the company’s charter schools.

Three years after the New York Times exposé, K12 appears to finally be taking a step away from virtual charter school operation — not because it is bowing to critics’ continuing complaints, but because virtual charters are no longer the lucrative or growing business they once were.