In the second-quarter ended June 30, the company took a $3.3 million unrealized loss due to the reduced value of its portfolio of student loans. And, like other companies holding the dung, management said the adjustment to its ARS holdings were but "a temporary decline in value." As the 10Q Detective has cogently argued prior—if temporary, why did the company subsequently reclassify this portfolio as non-current investment securities? Albeit a non-cash loss, this signals to us that actual market value losses could be much larger, for such an accounting maneuver keeps the value declines of the income statement (unrealized losses are reported in a contra stockholders' equity account on the balance sheet) until ultimate sale.
Management now intends to hold its ARS until they "can be liquidated in a market that facilitates orderly transactions." If need be, the company will hold their investments in this illiquid paper until their maturity dates, ranging from 2025 to 2047!
Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.