Why private prison stocks are winning big after Trump's poll victory

Last week’s announcement of Donald Trump’s return to the White House created a ripple effect through financial markets, especially in the private prison sector.

Reports indicate that CoreCivic and GEO Group, two major private prison corporations, are profiting significantly from incarcerations, with their stock prices soaring. CoreCivic's shares rose by nearly 75 percent, while GEO Group experienced a 76 percent increase just days after the election.

GEO Group is a publicly traded corporation, a business entity that is taxed twice separately. It has been investing in private prisons and mental health facilities for over three decades, drawing several lawsuits from prisoners and their families over a range of allegations - lack of hygiene, overcrowding, rioting and poor treatment of inmates.

Yet the corporation has emerged as “the single biggest winner in the US stock market — among companies of any size,” as per the investment news site Sherwood News.

Investors are anticipating a repeat of past trends and expecting the Trump administration — who has promised a mass deportation of illegal immigrants—to once again adopt a hardline stance on immigration and crime enforcement.

Understanding the private prison stocks

Private prison stocks in the US represent shares in companies that own and operate a network of prisons, immigration detention centres, and correctional facilities under government contracts.

While these prisons operate similarly to public institutions by housing inmates, they are structured to generate profit from anything it deals in.

Republicans argue that these prisons help address overcrowding, reduce costs, and benefit from specialised management expertise as justification for turning to private prisons.

However, critics counter that the profit-driven model can compromise inmate welfare, with reports of cost-cutting measures affecting safety and rehabilitation efforts​.

As of year end 2022, private prisons incarcerated 90,873 American residents, representing eight percent of the total state and federal prison population. In 2019, the number of migrants detained reached a peak of 55,000 supporting the rapid expansion of immigration detention facilities during Trump’s first term.

Together, these figures reveal the influence of two industry giants in the private prison sector: CoreCivic and GEO Group, which also operate immigration detention centres.

Both companies have invested heavily in lobbying efforts to secure government contracts, which reveals the tight connection between the private prison industry and federal policy decisions​, promising correlated revenue streams.

In 2022, the GEO Group generated $1.05 billion in revenue from the US Immigration and Customs Enforcement (ICE) contracts, accounting for 43.9 percent of its total revenue.

This included significant income from programs like electronic monitoring, which brought in $408 million, or 17 percent of GEO Group’s revenue.

On the other hand, CoreCivic made $552.2 million in revenue from ICE detention contracts in 2022, representing 30 percent of its total revenue.

Trump effect

President Donald Trump’s immigration and detention policies have long been a boon for the private prison industry.

Back in 2016, these policies led to unprecedented financial success for the leading private prison companies.

By early 2017, Trump’s administration, under then-Attorney General Jeff Sessions, reversed and expanded the role of private detention centres.

Last week, Trump's return speech, “Promises made, promises kept,” signalled a renewed commitment to stringent immigration enforcement and crime policies.

He vowed to implement the “largest deportation in the history of our country,” a promise that sent waves of anticipation through financial markets and private prison operators.

Vice President-elect J.D. Vance emphasised this sharp stance, stating that the administration would start by deporting “one million undocumented migrants” before assessing further action.

Trump has consistently criticised Democrats for their stance on immigration and framed border security as a national crisis.

He also pledged to crack down on crime and illegal immigration, with private prisons and detention centres emerging as a potential solution to the issue of overcrowding.

As the president-elect's promises of mass deportation will increase the need for immigration detention, both companies have outlined strategic plans to capitalise on the new administration's proposed policies.

“The GEO Group was built for this unique moment,” said GEO Group founder and executive chairman George Zoley on a Thursday earnings call.

Brian Robert Evans, CEO of GEO group called Trump’s plans an “unprecedented opportunity” reflecting the potential millions in revenue if the company’s facilities are filled to capacity.

Damon Hininger, CEO of CoreCivic, echoed these sentiments, suggesting that a new era of increased detention capacity was on the horizon.

“It feels like with this election this year, we’re heading into an era that we really haven’t seen, maybe only once or twice in the company’s history, where the value proposition of the private sector for both our state partners and our federal partners are going to be not only strong today, but even stronger as we go in the next couple of years.”

He stated, “We do think that there’s going to be an increased need for detention capacity,” referencing previous Republican proposals for immigration detention facilities, which could have funded up to 50,000 beds.

Hininger’s comments also revealed the growing political support for these measures, with both the Senate and the House likely to back higher levels of funding for detention infrastructure.

“That figure[50,000 beds] feels to be a floor, especially with Republicans now going to control both the Senate and likely the House.”

Zoley also said GEO Group was “well-positioned” to scale up from its current 13,500 ICE detention beds to “over 31,000 beds.”

Both firms are now eagerly anticipating a similar or even greater impact from Trump’s second term.

Yet, private prisons aren’t the only industry with soaring stock prices after the election.

Other big winners include crypto stocks, credit card companies and banks, and Tesla.