Pearson Falls on Concerns Over Testing Without Consent

(Bloomberg) -- Pearson Plc, the world’s largest education company, slid on concerns that it’s monitoring students’ responses to its courseware without their consent.

The Washington Post reported on Tuesday that Pearson has been embedding messaging into some versions of its learning software programs to track whether students who had received them performed better than students who hadn’t. The shares closed down 1.4 percent at 785.80 pence in London after falling as much as 3.4 percent intraday, the most since February.

Privacy concerns are top of mind for investors following high-profile data breaches, such as the scandal involving Facebook Inc. and Cambridge Analytica, which retained information on millions of the social network’s users without their consent.

“This issue is definitely in the spotlight and you don’t want to be a company that’s dragged into it,” said Ian Whittaker, an analyst at Liberum Capital Ltd. who rates the stock a sell. “Pearson’s reputation has not been that great in the U.S. anyway in recent years.”

Digital Quiz

In a statement from a spokesman, Pearson said recent media coverage of the issue had “mischaracterized a relatively minor product update and twisted the work to imply a malicious intent.” The company said it included messages of encouragement after a student selected an incorrect answer in a digital quiz in an effort to improve student success in higher-education courseware.

All results were tracked at a university level -- not on a student-by-student basis -- with no individual or personally identifiable student information collected, Pearson said. The company presented the findings of its research at an educational convention this month in New York, according to the Washington Post report.

Pearson Chief Executive Officer John Fallon has been working to turn around the British education provider as it contends with lower college enrollments in North America, the rise of free online resources and students opting to rent instead of buy textbooks, including from Inc.

Tuesday’s drop eats into a run in the stock since mid-February. The shares are still up 6.8 percent this year.

“We see today’s weakness as an interesting buying opportunity,” Macquarie Bank Ltd. analyst Giasone Salati wrote in a note to clients, in which he argued that the situation was unlike the issue involving Facebook and Cambridge Analytica. “The data from the study were not used for commercial purposes targeting individuals directly, nor to influence in any way.”

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