Quite ironically, once Trump Media (NASDAQ: DJT) is excluded, one would be hard-pressed to find a stock that hasn’t seen a massive rally in the wake of Donald Trump’s reelection as the President of the United States.
A relatively overlooked set of companies whose shares have also seen stellar surges are the controversial American private prison firms.
Two of the industry’s most prominent corporations, CoreCivic (NYSE: CXW) and Geo Group (NYSE: GEO) were even among the best-performing assets on November 7.
Specifically, CXW stock rose 25.60% to its latest closing price of $22.08, while GEO stock climbed 13.63% to $24.43. This one-session performance came at the back of equally impressive 5-day rises – amounting to 58.85% for the former and 59.31% for the latter.
Why prison stocks are surging after Trump’s reelection
The immediate reading of the prison stock rally is that the Republicans have positioned themselves as ‘tough on crime’ – though former President Bill Clinton did much to bring the Democratic party to the game as well – meaning that the number of incarcerated persons under the Trump administration is likely to increase.
There are already about 1.9 million people in American prisons – about 0.5% of the U.S. population, estimated at 345 million in 2024 – per the data from the Prison Policy Initiative.
It is worth pointing out that the figure is comparable to incarceration rates in the USSR at the height of the infamous GULAG System. Adam Gopnik even wrote in 2012 that the U.S. has more people under ‘correctional supervision’ than the Soviet Union ever did.
Along with regular incarceration, the upcoming second Trump era could potentially increase the American prison population due to the Republican’s pledge to execute mass deportation of people that are illegally in the country.
The Trump mass deportation plan and private prison profits
The policy could increase the prison population by nearly 12 million – the total number of undocumented migrants in the U.S., per the data retrieved from the Center for Migration Studies.
Though the proportion of all prisoners in private facilities is relatively small, it has been growing steadily. Firms like CoreCivic and Geo Group would likely handle a significant portion of the 12 million.
While the political rhetoric suggests that the process is quick and efficient, deportations tend to take months, sometimes even years.
Such a setup would almost guarantee the need to build additional facilities – facilities not unlike the camps constructed while the German Madagascar plan was deemed viable – and would likely significantly benefit the private prison corporations.
The American Immigration Council estimated that deporting 1 million undocumented individuals would cost nearly $90 billion annually, meaning that clearing the entire population could take more than $1 trillion every single year.
Given the significant involvement of private prison companies, much of these costs levied upon American taxpayers would turn into corporate revenue, likely vastly increasing the valuation and stock prices of firms like CoreCivic and Geo Group.
Why the mass deportations are unlikely to be efficient
Though it may be possible to expedite the deportation process at the expense of some of the checks that ensure the relative fairness of the U.S. legal system, both incentive and precedent indicate this will not be the case. It is even possible the process would be deliberately slowed down.
Specifically, private prison companies heavily benefit from a quirk of the 13th Amendment, which made slavery and involuntary labor illegal, except as punishment for a crime.
As for precedent, the Californian administration famously argued against the early release of non-violent criminals in 2014, arguing they should be used for cheap labor. In an ironic twist, it was Kamala Harris’ office that argued in favor of keeping more people in prison for longer.
Featured image via Shutterstock
Source: https://finbold.com/why-private-prison-stocks-are-soaring/