Why One Fund Slashed the Vast Majority of Its GEO Group Stake as the Stock Slipped 40%
Key Points
New York City-based Shay Capital sold 927,016 shares of GEO Group in the third quarter.
The overall position value fell by about $22.75 million from the previous period.
As of September 30, the fund reported holding 159,799 GEO shares valued at $3.27 million; it also held 47,500 GEO call options.
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On November 14, New York City-based Shay Capital disclosed a sale of 927,016 shares of GEO Group (NYSE:GEO), reducing its position by an estimated $22.75 million.
What Happened
Shay Capital reported in a November 14 SEC filing a reduction in its stake in GEO Group (NYSE:GEO). The fund sold 927,016 shares during the third quarter, bringing its GEO Group shareholdings to 159,799 shares valued at $3.27 million as of September 30. The transaction contributed to an estimated $22.75 million change in position value over the period.
What Else to Know
The GEO Group stake now represents 0.28% of Shay Capital LLC’s $1.15 billion in 13F reportable assets.
Top holdings after the filing:
- NASDAQ: FTAI: $48.89 million (8.85% of AUM)
- NASDAQ: PCT: $24.91 million (4.51% of AUM)
- NASDAQ: AZ: $12.78 million (2.32% of AUM)
- NYSE: NVRI: $12.73 million (2.30% of AUM)
- NASDAQ: NFE: $12.54 million (2.27% of AUM)
As of Friday, GEO shares were priced at $16.31, down 42% over the past year and vastly underperforming the S&P 500, which is up about 15% in the same period.
Company Overview
| Metric | Value |
|---|---|
| Price (as of Friday) | $16.31 |
| Market Capitalization | $2.31 billion |
| Revenue (TTM) | $2.53 billion |
| Net Income (TTM) | $237.33 million |
Company Snapshot
- GEO Group operates secure facilities, reentry centers, and electronic monitoring services across the United States, Australia, and South Africa, providing security, rehabilitation, and supervision solutions.
- The company generates revenue through long-term contracts with government agencies for facility management, electronic monitoring, and community reentry programs, leveraging a diversified service portfolio.
- It serves federal, state, and local government agencies as primary customers, focusing on correctional, detention, and community supervision markets.
GEO Group is a leading provider of secure facility management and community reentry services, with a presence in multiple international markets. The company’s integrated approach combines facility operations, rehabilitation, and electronic monitoring to address the needs of government clients seeking cost-effective and comprehensive correctional solutions. GEO Group’s scale and diversified service offerings position it as a key player in the security and protection services industry.
Foolish Take
GEO’s latest quarter looked explosive on the surface, with reported net income of $173.9 million and earnings of $1.24 per diluted share, up from $26.3 million and $0.19 per share, respectively. Dig a little deeper, though, and much of that strength came from a $232 million pre-tax gain on asset divestitures, not recurring operations. Strip that out, and adjusted net income landed at $0.25 per share, a much steadier but less dramatic result.
Operationally, the company is somewhat stabilizing. Third-quarter revenue rose to $682.3 million (up from $603.1 million), adjusted EBITDA held at $120.1 million, and management lifted its share repurchase authorization to $500 million while continuing to deleverage the balance sheet. GEO also highlighted more than $460 million in newly awarded annualized contract revenue expected to normalize in 2026, largely tied to ICE facilities and electronic monitoring services.
Still, this remains a politically exposed, contract-dependent business with earnings that can swing sharply based on asset sales, litigation reserves, and policy shifts. For a fund with over $1.1 billion in reportable assets and far larger core positions elsewhere, trimming GEO down to a fraction of a percent looks less like panic and more like risk management. Long-term investors should see this as a reminder that strong quarters matter, but repeatable cash flow matters more.
Glossary
Assets Under Management (AUM): The total market value of investments managed on behalf of clients by a fund or firm.
13F Reportable Assets: Securities holdings that institutional investment managers must disclose quarterly to the SEC on Form 13F.
Position: The amount of a particular security or asset held by an investor or fund.
Stake: The ownership interest or share an investor holds in a company.
Top Holdings: The largest investments in a fund's portfolio, typically ranked by value.
Facility Management: The operation and oversight of buildings and services, such as prisons or detention centers, for clients.
Electronic Monitoring: The use of electronic devices to supervise individuals outside of traditional incarceration settings.
Community Reentry Programs: Services helping formerly incarcerated individuals transition back into society.
Correctional Markets: Industries and services related to the management and rehabilitation of incarcerated individuals.
Detention: The act of holding individuals in custody, typically by government authorities.
Government Agencies: Federal, state, or local organizations responsible for public administration and services.
TTM: The 12-month period ending with the most recent quarterly report.
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Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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