Cecily Zamora
The idea of law enforcement investing in private prisons is a contentious issue, with some arguing that it is akin to a modern-day slave auction. Private prisons are for-profit institutions, and their involvement in the prison system has been criticised as a manifestation of racist policy, with private equity interests reaping enormous profits from the militarisation of borders and the policing of immigration. The GEO Group is a notable example of a private prison company that has been accused of circumventing campaign finance laws to fund political campaigns and lobbyist groups that are anti-criminal justice reform. Despite public sentiment turning against private prisons, law enforcement officers can still buy stock in private prison companies, and some analysts have even recommended GEO as a strong value buy.
| Characteristics | Values |
|---|---|
| Private prison stocks | GEO Group, CoreCivic, Serco, Palantir |
| Publicly traded private prisons | GEO Group, CoreCivic |
| Private prison operators | CoreCivic, GEO Group |
| Private ICE centers | CoreCivic, GEO Group |
| Prison stocks | GEO Group, CoreCivic, Serco |
| Prison services providers | CoreCivic, GEO Group |
| Prison industrial complex | $1 trillion invested, $98.7 billion in higher-risk companies, $847.2 million in private prison operators |
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What You'll Learn
The GEO Group: a multinational private prison operator
The GEO Group, Inc. is a publicly traded C corporation headquartered in Boca Raton, Florida. It is the world's second-largest private prison operator, investing in private prisons and mental health facilities in the United States, Australia, South Africa, and the United Kingdom.
The company operates under three business models: it owns and manages prisons; it manages government-owned prisons through management contracts; and it leases some of its prisons to third parties for use by government agencies. As of 2023, GEO Group owns, manages, or leases 49 prisons and jails, including immigration jails, in the US. Globally, the company operates 100 secure facilities, encompassing approximately 79,000-81,000 beds.
GEO Group has been criticised for its treatment of prisoners and has been the subject of civil suits in the United States. In 2016, the Obama administration decided to stop contracting with for-profit private prisons, causing GEO Group's stock price to plummet. However, the Trump administration reversed this decision, and GEO Group's stock price rose 21% after Trump's win. The company has also been accused of attempting to circumvent campaign finance laws to fund political campaigns and lobbyist groups that are anti-criminal justice reform.
Despite the controversy, analysts have issued bullish forecasts for the stock, with a median 12-month price target of $15, representing a potential increase of 44% from the most recent price.
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CoreCivic: America's largest operator of private correctional facilities
CoreCivic is one of the only two pure-play US prison stocks, the other being GEO Group. CoreCivic is America's largest operator of private correctional facilities, and investors are bearish on the stock. While its future federal business prospects have diminished, it has been successful in securing state-level contracts. For instance, CoreCivic recently signed a 30-year, $3 billion contract to build and operate two prisons in Alabama. The company generates 37% of its revenue from contracts with state and local governments, and 29% from contracts with ICE.
CoreCivic's stock has been impacted by recent executive orders banning new federal contracts with private prison companies. This is similar to an order issued by Barack Obama during his presidency, which negatively affected the GEO Group's stock price. However, former President Trump rescinded this order, and his administration expanded private prison contracts, benefiting companies like GEO Group.
The GEO Group has been criticised for its political lobbying and donations, with allegations of violating federal laws prohibiting contractors from influencing policy. There have been calls for GEO Group's delisting from the stock market, either voluntarily or through regulatory action by the SEC.
CoreCivic's exposure to federal contracts is lower compared to its state-level business, which may have factored into investors' sentiments. The company's stock has seen a decline of over 57% in the past year, indicating that the potential loss of federal business may have been priced in by investors.
While the private prison industry faces headwinds from recent policy changes, it is important to note the broader context of the prison industrial complex. This includes the involvement of companies in the militarisation of borders and the policing of immigration, as well as the exploitation of inmate labour, reflecting the racist origins of the modern prison system.
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Serco: a UK-based prison operator
Serco (LON: SRP) is a UK-based defence, government services, and prison facilities company that operates in Europe, North America, the Middle East, and Australia. Serco is a diversified company, with prisons being an important revenue driver, as it operates six prisons in the UK. Serco trades at a premium, but analysts expect its earnings to grow over the next three fiscal years, which could put upward pressure on the stock. The company also maintains a strong return on equity of 20.7 percent and pays a modest semi-annual dividend with a current yield of 2.01 percent.
Serco's forward P/E ratio is 10.4, its price-to-cash-flow ratio is 10.5, and its price-to-earnings-growth ratio is over 3.0, which is a sign of overvaluation relative to future growth. Despite this, analysts have issued bullish forecasts, with a median 12-month price target of $15, representing a potential increase of 44 percent.
While Serco is a UK-based prison operator, it is important to note that private prisons and law enforcement stocks are a controversial topic. The prison industrial complex, which includes private prison operators, has been criticised for profiting from mass incarceration, which disproportionately affects poor communities, immigrants, and people of colour. There have been calls for delisting private prison companies like GEO Group from the stock market to prevent them from influencing criminal justice policies and exploiting incarcerated individuals' labour.
Additionally, the recent executive order by President Biden banning new federal contracts with private prison companies has impacted the sector. While this specifically targeted federal-level correctional facilities, state and local governments, as well as ICE, still contribute significantly to the revenue of private prison operators.
Overall, while Serco is a UK-based prison operator with potential financial prospects, investing in private prison stocks involves ethical considerations due to the broader implications and impact on vulnerable communities.
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Private prisons as modern-day slave auctions
The idea of private prisons has been likened to modern-day slave auctions. The Thirteenth Amendment to the US Constitution technically abolished slavery, but it included a loophole that allowed involuntary servitude as punishment for a crime. This has allowed the prison system to become a form of compelled, low-cost labour, with private prisons profiting from the nearly free labour provided by incarcerated people.
The first for-profit prison, which used forced incarcerated labour, was created in New York State with the construction of Auburn Prison in 1817. The products created by the prisoners were sold, and by the 1820s, nearly all able-bodied male prisoners were contracted to private companies, which paid the prison for their labour. This set a precedent for the use of prison labour, which continues to this day. Incarcerated workers provide services valued at $9 billion annually and produce over $2 billion in goods.
The prison system has been used to specifically target Black Americans for incarceration and has been compared to the racist slaveholding history of the United States. Present-day prison farms, often worked by a Black majority, echo the inhumane brutality of the country's past. After the Civil War, Southern states criminalized formerly enslaved men and women for petty offences, allowing for the re-enslavement and mass incarceration of free Black Americans. This was a racist ploy to regain the labour pool of the plantation South.
Private prison companies set minimum incarceration rates, and if states fail to meet these rates, they may have to compensate for lost revenue. This creates an incentive to incarcerate more people, regardless of whether they have actually committed a crime. Private prisons also do not have the same standards for living conditions, and incarcerated people can often live in squalor and develop medical issues.
The GEO Group is a multinational prison and detention facility operator that has been criticized for its involvement in the private prison industry. The company has attempted to circumvent campaign finance laws to fund political campaigns and lobbyist groups that are anti-criminal justice reform. The stock price of GEO Group rose 21% after Trump won the 2016 election, and the company donated an additional $250,000 to his inauguration committee. This led to accusations that the company was attempting to influence federal law and policy for its advantage.
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Prison Free Funds: a tool to avoid investing in private prisons
Prison Free Funds is a tool that helps investors avoid putting their money in private prisons and the prison-industrial complex. It is built for investors who want to make a difference and ensure their money is not supporting economic systems of oppression and exploitation.
The prison-industrial complex is a network of companies, legislators, government systems, and investors that profit from the business of imprisoning people. This includes companies that sell goods and services to incarcerated people at inflated prices, and companies that benefit from prison labour, which is often grossly underpaid. The prison-industrial complex is also closely tied to the militarization of borders and the policing of immigration.
Prison Free Funds focuses on two aspects of the prison-industrial complex: companies involved in the prison industry (such as private for-profit prison operators and prison services providers) and companies involved in the militarization of borders and the policing of immigration. The tool calculates the total number of flagged holdings in a fund, the total amount of money invested in those companies, and the total percentage of the fund's portfolio they account for. It also breaks down the totals by holding category (prison industry and border industry) and by holdings that are higher risk or private prison operators.
The company-level research is provided by the American Friends Service Committee, a Quaker organization devoted to service, development, and peace programs worldwide. The Investigate scoring rubric is based on an assessment of three criteria: the salience of the human rights violation, the company's responsibility for the violation, and the company's responsiveness. Each criterion is evaluated on a 1-5 point scale, and companies that earn more than 10 points in the prison industry or border industry categories are marked as "higher risk".
Prison Free Funds also provides a unique dataset that allows investors to see how mutual funds and ETFs are rated on issues such as fossil fuels, deforestation, gender equality, guns, prisons, weapons, and tobacco. This helps investors ensure their money is aligned with their values and making a positive impact.
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Frequently asked questions
Yes, law enforcement can buy private prison stock. Prison-industrial complex screens have flagged several mutual funds that invest in companies involved in the prison industry, such as private for-profit prison operators and prison service providers.
Examples of private prison companies that law enforcement can invest in include The GEO Group (NYSE:GEO), CoreCivic, and Serco (LON: SRP).
Some law enforcement stocks that are not directly related to private prisons include Palantir Technologies (NYSE:PLTR), SoundThinking (NASDAQ:SSTI), and Cadre Holdings, Inc. (NYSE:CDRE).
Investing in private prisons is controversial due to the ethical implications of profiting from incarceration and the racist origins of the modern prison system. Critics argue that private prisons exploit inmate labor, contribute to mass incarceration, and lobby for harsher policing and longer sentencing.
Individuals who wish to avoid investing in private prisons can utilize tools and resources provided by organizations such as Prison Free Funds. These organizations help individuals ensure their economic power is not supporting the prison industrial complex and is instead aligned with their values.
