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Corrections Corp., GEO Group Shares Rebounding As Companies Issue Responses To DoJ News

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Corrections Corp., GEO Group Shares Rebounding As Companies Issue Responses To DoJ News

Following Thursday's Department of Justice news regarding privately-managed prisons, The GEO Group Inc (NYSE: GEO) and Corrections Corp Of America (NYSE: CXW) witnessed more than a 35 percent drop on Thursday, but rebounded Friday after issuing responses to the DoJ, each gaining roughly 10 percent in Friday's pre-market trading.

GEO Group disclosed Friday that the Federal Bureau of Prison (FBP) has extended its contract for a renewal term until September 30, 2018, under the current ten-year contract, valid through the end of September, 2022.

GEO Group Chairman and CEO George Zoley said, "Our company-owned D. Ray James Correctional Facility provides cost-effective, high-quality services on behalf of the Federal Bureau of Prisons. We believe that this contract renewal is indicative of the BOP's continued focus on quality as it evaluates its current privately-operated facilities."

Related Link: Investors Might Be Overreacting To DoJ's Prisons Announcement

Corrections Corp reacted to the FBP decision to modify the Criminal Alien Requirement XVI solicitation by cutting down the contract beds to 3,600 from the previous disclosed 10,800. This was in response to the Department of Justice recommendations to cut down the dependence on the privately-managed prison facilities.

Corrections Corp CEO Damon Hininger reacted by saying, "We have been a keen observer of the BOP's declining inmate population over the last three years. Nonetheless, we are disappointed with the BOP's decision to reduce its utilization of privately operated facilities to meet their capacity needs, and believe our value proposition remains strong."

The company clarified that at this time, contracts at the three facilities remain unchanged. The FBP will make a decision on extending the contracts at the end of their respective contract period. For Corrections Corp, these contracts represent approximately $131.2 million every year. Alternatively, the company gets about 7 percent of its total annual revenue from these contracts.

GEO shares, which plunged 39.58 percent on Thursday, gained 12.66 percent to $21.98 at time of writing in Friday's pre-market session. Similarly, Corrections Corp, which fell 35.45 percent on Thursday, recovered to advance 9.79 percent to $19.29.

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Posted-In: Criminal Alien Requirement XVI Damon HinigerNews Contracts Politics Legal Movers General Best of Benzinga

 

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