Investors sent private-prison stocks spiraling Thursday, but analysts say the selling might be overdone.
The two main companies in the private-prison business plummeted by as much as 50 percent Thursday after the Department of Justice announced the Bureau of Prisons will be phasing out contracts with them. GEO Group shares closed down 39.58 percent and Corrections Corporation of America closed down 35.45 percent.
"While our company was disappointed by today's DOJ announcement, the impact of this decision on GEO is not imminent," a GEO representative said, in a statement. "As acknowledged in the announcement, the BOP will continue, on a case-by-case basis, to determine whether to extend contracts at the end of their contract period."
Analysts following the company echoed the statement, downplaying the severity of the announcement.