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New York-based Edison Schools flunked out with trying to privatize Sherman's public schools. Why should things be any different in Dallas?

A A A Comments (0) By Jonathan Fox Thursday, Jan 27 2000

"This is a company that the market sees in an early stage," says Gregory Cappelli, director of equity research for CS First Boston. "They're blazing new ground."

The unwashed stock-trading rabble doesn't buy it. On the Internet, traders vent anger and fume over what they charge are misleading claims by the company and big investment firms. "There were lots of accusations and arm twisting before EDSN got approved [in Dallas]," says one anonymous poster. "Unlike what the company's press release says...it was by no means a wide acceptance of Edison schools. Some poor old [DISD trustees] were busy fighting on the streets against this school."

Mark Graham

Edison Schools will pull out of Sherman in June, putting Washington Elementary back in the hands of SISD.

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Would-be investors may also be perturbed by the company's own prospectus, which listed potential liabilities of its stock in accordance with Securities and Exchange Commission disclosure mandates. Under the heading "WE HAVE A HISTORY OF LOSSES AND EXPECT LOSSES IN THE FUTURE," the prospectus read, "We have not yet demonstrated that public schools can be profitably managed by private companies and we are not certain when we will become profitable, if at all."

Whatever its financial shape, Edison will likely stay afloat longer than balance sheets might indicate through aid from foundations and support from top investment firms. But at some point, the big firms will cut their losses, and Dallas' students may find themselves back in the same old public schools. "I think institutions sucked up this stock," warns one Internet poster. "Once they dump, look out below."

It's an admonition Dallas should consider. Putting too much stock in Edison may prove a bad investment for DISD.