Supermaxing prisons protected by minimum security
BREAKINGVIEWS-Supermaxing prisons protected by minimum security The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Jeffrey Goldfarb
NEW YORK, Aug 24 (Reuters Breakingviews) - Prisons got bailed out. Despite a steady decline in U.S. crime, the rise of punitive immigration enforcement has turbocharged detention centers. President Donald Trump may be good for business, but it's probably unsustainable and raises fresh concerns about perverse financial incentives at privatized for-profit penitentiaries.
When Trump secured his return to the White House, investors spotted fresh opportunities. Campaign promises indicated there was money to be made in backing domestic manufacturers, banks, cryptocurrencies, dietary supplements, defense contractors and oil producers. No inference was more profitable than one made from vows of mass deportation.
GEO GEO.N and CoreCivic CXW.N together oversee approximately 165 correctional facilities, with space for roughly 160,000 inmates. GEO’s shares have soared about 130% since November 2024 while CoreCivic’s are up nearly 160%, trouncing the benchmark S&P 500 Index .SPX and individual stocks in industries seen benefiting under Trump.
Although violent crime has been falling for years and the murder rate dropped to its lowest in seven decades, the enlarged and emboldened Immigration and Customs Enforcement agency is keeping wardens busy. Between 2016 and 2024, CoreCivic and GEO grew revenue by about 1% annually. For 2026, GEO’s top line is forecast to increase 24% from two years ago, hitting $3 billion, while CoreCivic’s is on track to jump 38%, according to Visible Alpha.
Just last month, GEO unveiled two new ICE contracts for $165 million a year while boss George Zoley said the company is in talks to sell some facilities to the agency. CoreCivic has offloaded four sites to the U.S. government for $2.2 billion, providing funds to possibly pay down debt or buy back stock.
The activity links to a president fixated on detaining and expelling immigrants. Because it's hurting the economy, his successors are likely to curb the extraordinary aggression. Prison operators are also attracting more unwanted attention. Immigrant fatalities in GEO’s Newark lockup prompted New Jersey to open a civil rights investigation and to sue the company for blocking state health inspectors. After Kansas lawmakers fought to impose restrictions on one location, CoreCivic sold it to the U.S. government.
Alleged mistreatment of incarcerated immigrants has revived widespread protests that amplify the risks for GEO and CoreCivic. Both say they prioritize prisoner well-being. Under President Barack Obama, the Justice Department sought to end its use of privately operated facilities. One 2016 study found that outsourcing detention costs less, but the administration argued it is neither safer nor cheaper than federally managed facilities. With both enterprises already trading at premiums to their 10-year average forward EBITDA multiples, shareholders are already sitting in minimum-security positions.
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CONTEXT NEWS
Prison operator GEO said on August 6 that its second-quarter net income increased 63%, to $47.5 million, from a year earlier, on a 15% rise in revenue, thanks to lower labor costs and the record amount of new business it secured in 2025.
The company also increased its financial guidance for the rest of 2026, but noted it does not include new contracts signed in July with U.S. Immigration and Customs Enforcement for facilities due to be active by the end of the year.
An immigrant who was being detained at the company's Delaney Hall detention center in Newark died on August 12. He is the third immigrant fatality at the facility since it reopened in May 2025.
New Jersey Attorney General Jennifer Davenport said on August 7 that she had opened a civil rights investigation into Delaney Hall. She sued GEO in June, alleging it refused full access to state health inspectors.
(Editing by Jennifer Saba; Production by Pranav Kiran)
((For previous columns by the author, Reuters customers can click on GOLDFARB/jeffrey.goldfarb@thomsonreuters.com))