Huge Move By Justice Department Hammers Prison Stocks

According to a memo released publicly by the U.S. Justice Department on Thursday, the department plans to phase out its use of privately-operated prisons, siting that they are less safe and less effective than government-run facilities.

Around 15% of the federal prisons in 2013 were private facilities. Three weeks ago the department decided to end a private prison contract for 1,200 beds.

According to the American Civil Liberties Union, the Justice Department does not have jurisdiction over state prisons and both Texas and Louisiana use private companies to run their prisons.

Deputy Attorney General Sally Yates wrote in the memo that private prisons do not maintain the same level of safety and security.”

Corrections companies took a beating in share price after the memo was released. Geo Group Inc. fell around 28% while Corrections
Corp of America sank around 20%.

Disclaimer: We have no position in Geo Group Inc. (NYSE: GEO) nor Corp. of America (NYSE: CXW) and have not been compensated for this article.