Private prison stocks plunge as Biden edges closer to the US presidency

Private prison property.
Private prison property.
Image: Reuters/Bing Guan
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Companies linked to private prisons plunged in the US stock market yesterday, as the still unfinished election tally signaled a path for Democratic candidate Joe Biden to win the White House.

CoreCivic, a real estate investment trust (REIT) that used to be known as Corrections Corporation of America, dropped 14% yesterday, its biggest decline since June. It’s the country’s largest owner of facilities for corrections, detentions, and re-entry programs. GEO Group, another REIT, dropped 11%, the biggest decline since March. It specializes in correctional facilities and has operations in the US, UK, South Africa, and Australia. The companies are estimated to account for about 75% of the private-prison industry in the US.

The US presidential election still isn’t over. The Associated Press is projecting 264 electoral college votes for Biden, bringing him close to the 270 needed to be the next president, while Donald Trump stands at 214. (Other reputable sources are less sure about Arizona.) The Trump campaign requested a recount in Wisconsin, and launched a string of legal challenges.

The Biden campaign has said it will change the US’s policies on immigration and asylum, “end prolonged detention, and reinvest in a case management program.” Private prison stocks were under pressure even before the election. CoreCivic, whose biggest customer is US Immigration and Customs Enforcement (ICE), was downgraded in April by credit-rating company Fitch, citing reduced access to institutional finance. JPMorgan, Bank of America, SunTrust Bank, and PNC Bank have said they will stop providing services and lending to the private-prison industry, and some investors have become wary of the sector.

During the Obama administration, in which Biden was vice president, the Justice Department said the Bureau of Prisons should stop or reduce its use of private prisons. Those plans were rescinded after Trump took office.