Private Prisons Are Bad Investments, but Biden's Detention Policies Could Boost the Industry

If the Biden administration restarts family detention, private immigrant detention contractors could get a financial bump they need after years of stock decline.

I was working on a conference presentation about the electronic monitoring industry yesterday and ended up following the White Rabbit of patent holdings down a long rabbit hole of commodifying cages and electronic monitoring and ended up back where I started, but with one simple observation: despite the fact that GEO Group and CoreCivic appear to invest heavily in “innovating” new products and ideas and despite the fact that these industries are often represented as money-making schemes by critics, they just don’t seem to be very good businesses.

By looking at the stock price of the two main private prison companies that contract with the federal government, GEO Group and CoreCivic, over the past 23 years, it certainly appears that the glory days are all in the past—during the Obama administration, in fact.

From a high during the second Obama administration, both stocks took a slump close to the 2020 election (probably on the presumption that Hillary Clinton would win?), then jolted up when Trump won.

I remember pointing this out online shortly after the election with a screenshot of CoreCivic’s price escalating dramatically. But since 2017, it has been all bad news. And not because of COVID-19, either, which led to a decline in ICE’s detained population.

This should be relevant for anyone involved in efforts to divest from these companies. One might argue that we should leave political and moral questions out of investment decisions, and thereby sideline arguments that, say, universities should pull its money out of the private prison industry. But do these industries even make good financial sense to begin with? It doesn’t seem like it.

Comparing these two stocks to the NASDAQ over the past 20 years reveals just how bad of an investment these companies would have been. If someone invested $100 in GEO Group in 2003, they would have severely underperformed the market overall ending up with about $170. If someone invested $100 in CoreCivic 20 years ago, they would just barely have been able to keep their $100.

What’s remarkable here—to me, anyway—is that this apparently poor stock performance comes during a time of what I would have considered to be notable growth. GEO Group bought BI, Inc. in 2011, and BI brought with it the contract for ICE’s alternatives to detention program as well as an ongoing series of patents and trademarks for electronic monitoring and other technology “services” to law enforcement agencies.

BI is only a small part of GEO Group, I’m sure, but it’s not like they’ve stopped working. But that intellectual labor has not translated (at least not directly) into some boon in market value.

Now, of course, stock price isn’t everything; there are many other ways of evaluating the sustainability and economic value of a company. And this is all very back of the envelope, so if you’re a financial analyst and you want to clarify, elaborate upon, or point out problems with this post, please do.

But before I conclude, I want to make one final observation about why all this matters.

Title 42 is coming to an end soon, and according to people I interviewed along the US-Mexico border as well as the prevailing wisdom from colleagues, this is likely to lead to a growth in immigrant detention. Moreover, reporting on the Biden administration revealed that officials are considering restarting family detention, which at one time included the largest detention center in the country in Dilley, Texas.

Even with the large numbers of immigrants on electronic monitoring, these two factors could combine to produce a new growth in detention, and it seems plausible that private detention contractors like GEO Group and CoreCivic would be the main beneficiaries of this growth. It wouldn’t be surprising to discover that they are even lobbying for such policies.

For private immigrant detention contractors, a growth in immigrant detention couldn’t come at a better time.

Photo by Maxim Hopman on Unsplash

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