CoreCivic, Geo Group Rally By Double Digits Since Election Day: Why Trump Boosts Private Prison Stocks

President-elect Donald Trump‘s second term could provide for-profit prisons an economic and regulatory boon amid Trump’s plans to deport people living in the country illegally.

Private Prisons: Corecivic Inc CXW and Geo Group Inc GEO are the two largest private prison operators in the United States.

Geo Group owns 50 facilities and 64,502 beds across the U.S. concentrated in the South and Southwest. In 2023, CoreCivic operated 43 facilities with approximately 65,000 beds, according to company filings. The facilities include migrant detention centers and minimum-to-medium security prisons.

Private prisons are a topic of debate given their for-profit nature and alleged human rights abuses. According to the University of Chicago Law School, labor conditions in private prisons are poor. The majority of prisoners are forced to work, often for wages under a dollar per hour, or face solitary confinement or loss of visitation rights. The report found that prisoners produce at least $2 billion annually in goods and over $9 billion in maintenance services.

In August 2016, then-President Barack Obama announced a plan to reduce and eliminate the use of private prisons in the U.S. Following Trump’s inauguration for his first term in 2017, Attorney General Jeff Sessions rescinded Obama’s memorandum, saying the decision “impaired the Bureau’s ability to meet the future needs of the federal correctional system.” The stock prices of Geo and CoreCivic subsequently rallied over 30%.

As of July 2024, there were 662,566 “noncitizens” with criminal histories on ICE's national docket, which includes those detained by ICE and on the agency's non-detained docket. Of those, 435,719 are convicted criminals and 226,847 have pending criminal charges.

Trump’s Immigration Plan: Future immigration enforcement, an issue Trump made central to his 2016, 2020, and 2024 campaigns, would require detention centers, perhaps operated by Geo and CoreCivic.

The ACLU found in 2023 that over 90% of migrants detained by ICE were held in privately owned facilities.

In a CNN interview, Tom Homan, Trump’s incoming border czar, said the government needs a minimum of 100,000 beds to carry out Trump’s immigration plan. This represents a more than 100% increase over current capacity. He also elaborated on the extent to which Trump will carry out deportation.

"I don't have a number. We want to arrest as many people as we can that are in the country illegally," Homan said. "If you're here illegally, you're not off the table. It's a violation of the law; it's a crime to enter this country illegally."

The American Immigration Council, a pro-immigration advocacy group, says there were around 11 million people living in the U.S. illegally in 2022, roughly 3% of the country’s population. The council estimates that a deportation plan would cost at least $315 billion.

Why it Matters: Geo Group and CoreCivic also appear to be preparing for the future demand for detention centers. On Dec. 16, Geo Group announced a $70 million capital expenditure plan to expand ICE service capabilities.

In September, short-seller Andrew Left called Geo Group the “default play” for a Trump presidency given his positions on immigration enforcement.

The market at large also seems convinced. Geo Group’s stock has risen over 86% since election day, while CoreCivic’s stock has risen over 58%.

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