CoreCivic and the GEO Group, two of the largest U.S. private prison companies, could lose as much as a quarter of their revenue, about $1 billion a year between them, under new limits on the sector from President Joe Biden, reports Reuters. Shares in GEO Group and CoreCivic took a hit on Tuesday after Biden signed an executive order to roll back the U.S. government’s use of private prisons, a part of what he called an initiative to tackle systemic racism. Shares of GEO and CoreCivic had already been walloped in the past year as COVID-19 restrictions at the U.S.-Mexico border and capacity restrictions for health reasons kept facilities they operate for U.S. Immigration and Customs Enforcement (ICE) well below capacity.
Biden’s current order applies to the Justice Department’s federal contracts with private prisons, which would include facilities used by the Bureau of Prisons and U.S. Marshals Service, though the order did not specifically name those agencies. The order does not apply to the Department of Homeland Security and therefore not to ICE facilities. In 2019, CoreCivic earned 5 percent of its total revenue from its federal contracts with the Bureau of Prisons and 17 percent from the U.S. Marshals, or a total of about $440 million. Its largest customer in 2019 was ICE, accounting for 29 percent of business. At GEO Group, U.S. Marshals and Bureau of Prisons accounted for 23 percent of total revenue in 2019, or about $570 million. Neither prison company has raised money in public markets since 2019 and Biden’s new order could increase credit risks, making it harder for either company to refinance debt.