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capitol-report:-prison-stocks-under-pressure-with-biden-due-to-sign-executive-order
capitol-report:-prison-stocks-under-pressure-with-biden-due-to-sign-executive-order

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Capitol Report: Prison stocks under pressure with Biden due to sign executive order

Capitol Report


New president also expected to roll out other executive actions on Tuesday to ‘advance racial justice,’ adviser says

A guard escorts an immigrant detainee at a California facility managed by GEO Group in this 2013 photo.


Getty Images

Prison stocks were tumbling Tuesday as President Joe Biden was expected to sign an executive order in the afternoon that would curtail use of private prisons.

Analysts have been predicting trouble for publicly traded companies that run those facilities given Biden’s pledge during the 2020 campaign to “end the federal government’s use of private prisons.”

“With President Biden’s team falling into place at agencies across the federal government and his most senior nominees undergoing Senate confirmation, we have begun the countdown to a ‘whole of government’ shift in policy that will have a materially adverse impact on private prison companies, particularly CoreCivic (CXW) and GEO Group (GEO),” said Beacon Policy Advisors analysts in a note last week.

CoreCivic’s stock
CXW,
-6.69%

was down about 10% on Tuesday and off 63% over the past 12 months, while GEO shares
GEO,
-12.69%

were sliding 15% and have shed 58% over that period. The broad S&P 500 index
SPX,
+0.07%

was little changed and has gained 17% over the past 12 months.

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Recent months have delivered a big change in fortunes for the companies from the situation four years ago, when a Canaccord Genuity analyst said former President Donald Trump’s inauguration was highlighting the most compelling opportunity in years to buy prison stocks.

Beyond the move on private prisons, Biden on Tuesday afternoon was expected to sign another executive order that limits the transfer of military equipment to local police departments.

In addition, he will “sign a memorandum directing the Department of Housing and Urban Development to mitigate racial bias in housing and affirmatively advance our nation’s fair housing laws,” said Susan Rice, a top Biden adviser on domestic policy.

“The president will also sign an executive order reinvigorating the commitment of all federal agencies to engage in regular robust and meaningful consultation with tribal governments, and the president will sign a memorandum directing all federal agencies to take steps to combat xenophobia and acts of violence against Asian-Americans and Pacific Islanders,” Rice said during a news conference.

“These are a continuation of our initial steps to advance racial justice and equity through early executive action,” she added.

Related: All of President Biden’s key executive orders — in one chart

And read: Biden administration looks set to target ‘forever chemicals,’ as 3M warns about ‘onerous regulation’

Regarding the expected change on private prisons, Beacon’s analysts said last week that with the House and Senate both now under Democratic control, there is less opportunity for Congress to interfere.

“Skeptics of the ability of the Biden administration to fulfill this campaign promise typically point to the protests that will be likely from the USMS and ICE career staff, who have come to rely on these companies,” Beacon’s team added, referring to the U.S. Marshals Service and Immigration and Customs Enforcement.

“To get around these complaints with ICE, we expect that the Biden administration will likely release a substantial number of detainees and dramatically scale back the number of undocumented immigrants that are detained and deported in the future. … For the USMS, the decision is trickier, but we expect that the first step will be to redouble efforts to house federal detainees in state and local prisons.”

Rice said Tuesday’s executive order is aimed at the Department of Justice (which oversees the USMS) but not ICE.

Mizuho analysts have sounded downbeat on prison stocks since Biden’s election as well, saying in a November note that they expect “REITs involved in prisons/detention centers to be negatively impacted.”

Now read: How Washington’s criminal-justice reform touches just a small slice of the U.S. prison population — in one chart

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