Why One Fund Slashed the Vast Majority of Its GEO Group Stake as the Stock Slipped 40%

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

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.

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.