A Democratic president is bad news for the private prison industry, which is taking a financial hit as the reality of Joe Biden’s election win starts to sink in.
Stock prices for the country’s two largest prison companies, CoreCivic and the GEO Group, fell 19 percent and 14 percent respectively after Election Day.
Black people have been historically overrepresented in federal and state prison and county jails, but the racial disparities in private prisons are even worse, according to UC Berkeley African-American studies Ph.D. student Christopher Petrella.
Biden ran on a campaign promise to end the federal government’s use of private prisons. Both GEO and CoreCivic depend on federal contracts with Immigrations and Customs Enforcement (ICE), the Bureau of Prisons (BOP) and the U.S. Marshals Service for more than half their revenue, according to their most recent annual reports, Mother Jones reported.
Prison stocks were among the biggest winners after Donald Trump won the 2016 election. A month after he became president, Trump rescinded a Barack Obama directive from August 2016 to phase out federal use of private prisons. Investors believe a Biden presidency could jeopardize the future of the industry, Benzinga reported.
The Trump administration detained tens of thousands of immigrants under family separation policies that turned Democrats against the private prison industry. Private prisons did not hold separated children but did hold adults and families detained together.
In 2019, CoreCivic and GEO made about $1.3 billion each from contracts with Immigration and Customs Enforcement — about a third of the companies’ revenue.
Private prisons saw record-high profits during the Trump administration, American Progress reported.
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Executives from both companies donated large sums of money to the Trump campaign. Both recently signed long-term government contracts for detention centers in Texas and California that Biden may have difficulty undoing, Benzinga reported. The Trump administration sued California over its ban on private prisons.
A worst-case scenario for prison stock investors would be Biden taking the White House and Democrats controlling both houses of Congress.
Public backlash against Trump immigration policies hurt private prison companies’ access to financing, according to Mother Jones. Eight banks including JP Morgan and the country’s largest public pension fund said in 2019 that they would divest from the prison industry. Stock prices for GEO and CoreCivic have been falling ever since as policies to slow the spread of covid-19 led to reduced prison populations.