If you want to pick an NCAA Tournament team for your bracket and a stock for your portfolio, Grand Canyon University is offering this rare, two-for-one March Madness special.
When the 15th-seeded Antelopes take the court Saturday against No. 2 Iowa, they will do so as the only tourney participant once associated with a ticker symbol—LOPE.
As the only one-time for-profit university in the history of the D-I men’s tournament, they are also the only team in the field whose opponent’s conference commissioner once served on its corporate board: From 2012 to 2019, Kevin Warren, the current Big Ten boss, was a non-employee director of Grand Canyon, receiving $921,250 in cash and stock awards during that time. (Warren resigned in August 2019, two months after it was announced that he had been selected to lead the Big Ten.)
At GCU, the relationship between these two things—college athletics and commercialism—are made explicit and unapologetic, laid out in the school’s filings with the Securities and Exchange Commission, which frequently invoke its sports ambitions.
“We believe this increased brand recognition has been the primary factor behind our increased enrollment, especially in Arizona and bordering states,” GCU stated in its 2013 annual 10-K, after accepting an invitation to join a Division I conference. In later years the company repeatedly told investors the move “enhanced our visibility.”
Indeed, Grand Canyon appears much more straightforward and clear-eyed about the importance of sports success to its financial mission than its traditional intercollegiate counterparts.
Aside from bracketeers hungry for first-round upsets, GCU enters this tournament with an unusual, built-in constituency. This includes the vast majority of its alumni, who never stepped foot on its Phoenix-based campus, having earned their degrees online. It also includes the institutional and retail investors with some financial stake in Grand Canyon Education, Inc. (GCE), the for-profit, publicly traded entity that once owned the school and continues to service it.
For those who have closely followed LOPE, the Antelopes’ tournament bid was long considered the institution’s “holy grail,” said Trace Urdan, an education market analyst who has covered the stock since its 2008 IPO. “This was something investors always looked at.”
Also among GCU’s intrigued followers are reform-minded critics of college sports and higher education, who take fondly to challengers of longstanding norms.
“Part of my frustration with big-time college sports is the lack of intentionality with how things built over time and also the very angry defensiveness… you get any time you point out how things have to be done differently,” said Victoria Jackson, a former track star at Arizona State who now advocates for college athlete rights while teaching sports history at ASU. “I think because GCU is new, they are not burdened by that same sort of pressure to maintain systems that are not great systems.”
That Grand Canyon finally reached college basketball’s Promised Land this season—when the pandemic forced American higher ed to take much of its teaching online, as GCU and other for-profit institutions had long been pilloried for doing; and just as the Supreme Court prepares to decide whether the NCAA and its members have been violating antitrust law—makes the mercurial university a particularly fascinating avatar for the current moment.
GCU even has its own, homegrown NIL controversy, albeit of a slightly different flavor.
In a lawsuit filed by GCU’s former head men’s basketball coach Dan Majerle, who was fired by the school last March, the one-time Phoenix Suns star accused his former employer of improperly using his “name and likeness” for “weeks following the termination.” The suit was dismissed in July; neither side has said publicly whether a settlement was reached. GCU’s only current nonprofit tax return, for the year 2018, showed Majerle had earned just over $800,000 in annual compensation.
Under first-year coach Bryce Drew, the school’s first tournament bid comes as it is engaged in another courtroom battle in its quest to return to its original nonprofit status—and be fully accepted in the eyes of officialdom. As of now, the IRS, the state of Arizona, the Higher Learning Commission (GCU’s regional accreditor), and the NCAA have all recognized the school’s conversion. The lone holdout is the federal Department of Education, which last year denied GCU’s bid to qualify as a nonprofit under Title IV of the Higher Education Act, citing its ongoing services agreement with the for-profit, publicly traded GCE.
GCU, the Big Dance’s only formerly for-profit contestant, is a particularly fascinating avatar for the current debates that swirl over the NCAA and its economic engine.
Since the school’s new nonprofit entity acquired the assets from GCE back in July 2018, for $876.6 million, the for-profit company now receives 60% of Grand Canyon’s yearly tuition and fee revenue in exchange for providing educational services.
To some experts, this latest DOE snag only makes Grand Canyon’s sports saga more compelling—and telling.
“It is a school that is at least trying to gain equivalency in the nonprofit world and is struggling to do so at exactly the same time that the nonprofit [college] athletic world is struggling to keep its identity,” said Peter Lake, director of the Center for Excellence in Higher Education Law and Policy at Stetson University. “It is almost as if they have created the perfect discussion point for the intersection of amateur athletics and nonprofit [education], and it is bouncing across both lines simultaneously.”
Last month, GCU sued the DOE, claiming that its refusal to acknowledge the school’s nonprofit status was “arbitrary and capricious.” Since the DOE’s decision came under the Trump Administration, it is not yet clear whether the department will continue to disavow GCU’s nonprofit status. The DOE has yet to file its response, but Lake said if it holds to its position, it could have implications beyond Grand Canyon.
“You have an institution that wants to be viewed as a nonprofit entity that is involved in one of the most basic activities of amateur athletics,” Lake said. “So, it raises this question about how amateur is something if it is really being run for profit. The vast majority of competitors that are visible in major college athletic sports are at least operating under the aegis of a nonprofit world, but the dialogue is moving to the fact that these are minor league sports.”
Grand Canyon’s quixotic journey to March Madness began in 2008, when the school hired Brian Mueller, the former president of the University of Phoenix’s parent company to take the reins ahead of GCU’s initial public offering. Five years before, a group of investors had bought the private Christian university, which had functioned as a nonprofit since it was chartered in 1949, as it teetered on the edge of financial ruin.
“We didn’t realize how close we were to the bank locking the door and going home,” said Keith Baker, who worked as a GCU athletics administrator for 34 years until 2017.
Baker said that as it transitioned to a for-profit school in the early aughts, the university’s leadership was initially interested in returning its athletic department to its NAIA roots. Aware that the NAIA only accepted nonprofit members, Baker said, “It took me about a week and a half to get one of the attorneys brokering the [university’s transfer of ownership] to say we are a ‘for-profit educational institution,’ and express it in those words.”
Although Baker says the institution’s for-profit conversion had stigmatized it in the eyes of other athletic departments, it was “refreshing” for an administrator.
“From the business model side of things, we have one boss,” he said. “We didn’t have a president, it was a CEO—the CEO says what happens, and we do it. It is not like I have donors and boosters.”
Mueller’s arrival at Grand Canyon coincided with a change to the NCAA’s reclassification process, which no longer allowed universities to self-determine a jump to Division I. Instead, schools had to first be accepted and sponsored by a full-member D-I conference. After several years knocking on doors, Grand Canyon joined the Western Athletic Conference at the start of the 2013-14 academic year. Karl Benson, the WAC commissioner from 1994 to 2012, said that the conference presidents had previously rebuffed letting in a for-profit school but had gotten sufficiently “desperate” after losing several key members to the Mountain West.
As part of the four-year reclassification process, Grand Canyon was not allowed to participate in any NCAA tournaments or championships, but Majerle’s hiring instantly brought star power to the program. The hire was facilitated by the school’s relationship with Jerry Colangelo, the owner of the Suns and the Arizona Diamondbacks and a GCE board member since 2009. The executive’s name now graces the school’s college of business (which touts an online MBA “with an emphasis in sports business”) and the Jerry Colangelo Museum on campus.
Majerle quickly made the Antelopes competitive in the WAC. But elements of the establishment sought to throw a wrench in GCU’s membership plans, insisting the university’s for-profit status was anathema to college sports ideals. Arizona State president Michael Crow, in a 2013 interview with Insider Higher Ed, accused GCU of “trying to game college athletics to drive up their stock price.”
Crow’s criticism followed a comment Mueller had reportedly made earlier that year during an earnings call, when he talked up the publicity benefits of a GCU-Stanford soccer game on the Pac-12 Network. Subsequently, the Pac-12 issued a three-year embargo forbidding members from playing Grand Canyon, and wrote of its concerns about for-profit participation in D-I to the NCAA. The NCAA in 2017 created a special classification for for-profit institutions—GCU being the only such D-I member—that allowed the schools to fully compete in championships, but without having voting privileges on NCAA committees or eligibility for grants or financial distributions directly from the NCAA.
All the while, GCU built its brand, as its men’s basketball program averaged 7,000 fans per game during the 2016-17 season—a nugget highlighted in the company’s 10-K filing that year. After his team escaped with a road win in December 2016, then-Louisville coach Rick Pitino praised Grand Canyon University Arena as boasting “the toughest crowd” he had ever faced during his 40-plus-year coaching career. “I was doing Dan a favor coming out here,” Pitino said. “I would have probably lost my job if I had lost… but you’ve got something special here.”
Grand Canyon officially completed its transition to D-I the following July but was unsatisfied with its quasi-citizenship within the NCAA and began the process of reverting to a nonprofit, telling investors the ability to “participate in NCAA governance” was among its key rationales.
With much of higher education pounded by the pandemic, both the university and GCE have fared reasonably well over the last year. The stock, however, has largely underperformed. On Sunday, Jeff Silber, an analyst for BMO Harris Capital Markets, put out a note to investors, hailing Grand Canyon’s bid to the Big Dance. In it, he referenced the past Cinderella runs of Butler and George Mason, and the expectation that “merchandise sales typically increase during a tournament run.”
In an interview with Sportico, Silber downplayed the direct impact he thought the Antelopes’ current success would ultimately have on the LOPE stock price. Then again, given the attention that attends a few upsets in March, there seems to be ample anti-establishment material in Grand Canyon’s backstory to entice a Redditor or two.
“The delicious irony of this is exactly the ambiguity,” said Urdan. “People in progressive education policy circles are highly critical of sports programs in general, with resources, in their minds, being extracted from students. So, the irony here is Grand Canyon is basically beating not-for-profit public education at its own game—which is the marketing aspect of the sports program.
“Anything you can yell at them about, ‘Oh, they are this cynical and self-interested,’ you can say that about not-for-profit and public institutions,” he said. “The truth is [athletics] functions in all the good and bad ways as it does at those other schools.”