Ariz. losses result in large stock sale


October 01, 1992|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- Financial burdens from a pilot school in Arizona caused the head of Education Alternatives Inc., which manages nine Baltimore public schools, to sell 100,000 shares of his company's stock.

Chairman John T. Golle said yesterday that he sold the stock because he is holding $1.9 million in debt on the Tesseract School in Paradise Valley, Ariz., and needs to improve his personal liquidity.

The privately run elementary school opened three years and has not shown a profit, though Mr. Golle said its cash flow was now neutral.

"I was holding $1.9 million and receiving nothing on it and just felt that, for me, it was the best thing to do," Mr. Golle said.

The sale on Sept. 11 came just days after Education Alternatives started its controversial experiment to privately manage nine public Baltimore schools. The Minneapolis company has a five-year contract with the school board worth an estimated $26.7 million for the coming year, the first major contract landed by the fledgling firm.

Until the Baltimore deal, Education Alternatives had acted as a consultant to a school in Miami Beach, Fla., and had run and owned two private schools, the Arizona school and one in Minnesota.

In an effort to focus its operations on managing public schools and not owning private schools, the Minnesota school was turned over to a non-profit foundation, but the unprofitable Arizona school was taken over by Mr. Golle and a partner, Minneapolis real estate investor George Welsh.

Both schools were held up as models of how Education Alternatives schools would be run -- individual attention for students, small groups and two instructors in each classroom. The Arizona school's poor financial performance, however, became a financial burden for Mr. Golle, forcing him to sell the stocks, he said.

Michael Moe, an analyst for emerging growth stocks with the Minneapolis brokerage of Dain Bosworth, said Mr. Golle's sale just after his company started its Baltimore project could give the appearance that he was selling because the stock was performing well, but said this was highly unlikely.

By selling only 100,000 shares of the 770,000 shares that he either owns or has options to acquire, and by selling to another top Education Alternatives executive, Director Richard Burke, Mr. Golle was not signaling any loss of confidence in the company's operations, Mr. Moe said.

"If he had made the sale on the open market, then I would have been concerned. But simply selling to a friend and director doesn't signify anything," Mr. Moe said.

The program to run nine Baltimore public schools has come under heavy fire from the local teachers union, which claims that Education Alternatives is sometimes heavy-handed in personnel matters, and some parents, who have felt a lack of communication with the new administration.

Education Alternatives' stock closed yesterday at $13 a share, down 3/4 , but still close to its high of $14 for 1992. Carol Clark, an analyst with John Kinnard, the brokerage firm that underwrote Education Alternatives' two sales of stock, also said that it wouldn't make sense for Mr. Golle to sell stock now if he were only concerned with profit. Kinnard forecasts a profitable fiscal 1993 for Education Alternatives after losses of $1.6 million on revenue of $2.9 million in the fiscal year that ended June 30.

Top shareholders

Top shareholders, number of shares and stake in company, as of June 23, 1992.


John Golle.. .. .. ..763,302.. .. .. ...18.4%

Gale Mellum.. .. .. .266,825.. .. .. .. .6.5%

Robert Karon.. .. .. 112,057.. .. .. .. .2.8%

Richard Burke.. .. ...50,000.. .. .. .. .1.3%

David Bennett.. .. .. 25,000.. .. .. .. .0.6%


Perkins Capital.. .. .528,450.. .. .. ..13.5%

David Miller.. .. .. .248,333.. .. .. .. 6.0%

John Goodman.. .. .. .245,000.. .. .. .. 5.9%

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