NEW YORK, January 3, 2021 / PRNewswire / – Pomerantz LLP announces that a class action lawsuit has been filed against Stride, Inc. f / k / a K12 Inc. (“K12” or the “Company”) (NYSE: LRN) and some of its directors. The collective action, filed in U.S District Court of the Eastern District of Virginia, Alexandria Division, and registered under 20-cv-01528, is in the name of a class consisting of all persons and entities other than the Defendants who have purchased or acquired K12 securities between April 27, 2020 and September 18, 2020, both dates inclusive (the “Class Period”), seeking to recover damages caused by the Defendants’ violation of federal securities laws and seeking remedies under Sections 10 (b) and 20 (a) of the Securities Exchange Act 1934 (the “Exchange Act”) and rule 10b-5 promulgated below, against the Company and some of its senior officials.
If you are a shareholder who purchased K12 securities during the Class Period, you have up to January 18, 2021 to ask the Court to appoint you as Principal Claimant for the class. A copy of the complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby in [email protected] or 888.476.6529 (or 888.4-POMLAW), toll-free, extension 7980. Those who request by email are encouraged to include their mailing address, telephone number and the number of shares purchased.
[Click here for information about joining the class action]
K12 is a technology-based education company that provides proprietary and third-party educational curriculum, teacher training, administrative support, information technology support, software systems and educational services. The company operates virtual learning systems worldwide. As a provider of online content and educational services, K12’s financial and operational success and well-being critically depend on its technical capacity and ability to provide and maintain operational and well-functioning information technology systems and infrastructures.
The Complaint alleges that during the Class Period, Defendants made materially false and misleading statements and did not disclose material adverse facts about the Company’s business, operational and compliance policies. Specifically, the Defendants made false and / or misleading statements and did not disclose to investors that: (i) K12 did not have the technological capabilities, infrastructure and experience to support the growing demand for virtual and mixed education required by the global pandemic; (ii) K12 lacked adequate cyber attack protocols and protections to prevent the deactivation of its computer system; (iii) K12 was unable to provide the necessary levels of administrative support and training for teachers, students and parents; and (iv) based on the foregoing, the Defendants lacked a reasonable basis for their positive statements about the Company’s business, operations and prospects and / or lacked a reasonable basis and omitted facts.
Starting at March 2020, the global pandemic has forced school districts across the country to end classroom teaching and shift all learning activities to online and combined education. K12, which had a history of reporting disappointing financial results during the 10-month period before schools closed, saw a unique opportunity to renew itself, gaining a large share in the rapidly growing market for online education. Thus, almost immediately after the national closure of classroom teaching, the K12 embarked on an intensive campaign to convince the market that it was well positioned and technologically capable to accommodate and meet the large increase in students, parents and teachers who were changing for online education. To this end, the Defendants released dozens of false and misleading statements in which they praised the technological resources of the Company’s online learning platforms, cybersecurity protocols, preparation for large volumes of students, as well as the administrative support and training that K12 would provide students , parents and teachers.
The elementary and high school self-promotion campaign worked well. Based on K12’s false and misleading statements, the investor community expected K12 to experience a major boost in its finances and successfully capitalize on the opportunities presented to it by the global pandemic. For example, in July 15, 2020, when K12 common shares were traded around $ 43 per share, Citron Research published a $ 100 price target for K12. Citron Research’s forecast was based on its belief that the K12 was “better positioned to take advantage of [the] megatrend [of shifting to full online education]. “Likewise, securities analysts have gradually raised the rating of K12, based on comments from Company executives on current enrollment trends. As a result of the K12 self-promotion campaign, the price of K12 shares has skyrocketed for its higher closing price of $ 51.60 per share in August 5, 2020, a wave that was unmatched by any of the K12’s competitors.
In reality, however, and without the knowledge of the investing public, the K12 was not ready to take on the increased load and lacked technological resources to support and meet the massive increase in traffic on its website and learning platforms. In fact, the K12 lacked adequate infrastructure to allow thousands of students and teachers to connect to their systems and use the audio and video resources needed for remote teaching. Furthermore, despite K12’s representations to the contrary, its cybersecurity measures and protocols were so weak that a second-year high school student managed to breach the network on which K12 was critically dependent and thus undermined the K12’s online platform. K12 and providing its services to hundreds of thousands of students over several days. Issues related to the functionality and support of the K12 platforms were compounded only by the lack of training and instruction provided to teachers and parents, who received little support and practical experience and insufficient training before the platform was launched.
Contrary to the facts stated by K12, reports began to emerge that K12 training for teachers in Miami-Dade County, one of the nation’s largest school districts, had been terribly inadequate. For example, in August 26, 2020, teachers from the Miami-Dade County school district reported that the training provided by K12 was ineffective and “unacceptable” as they lacked the necessary instructions for using the K12 platform.
With this news, the price of K12 common shares fell dramatically by 7% over two trading sessions, to close at $ 37.70 per share in August 27, 2020, in exceptionally high volume.
As soon as classes started August 31, 2020, the situation got worse. The K12 experienced major technical problems and interruptions with teachers and students from Miami-Dade County being unable to log in to the platform and use its content, which led local authorities to publicly scold the K12 for not being “ready” for the opening of the school year. On the third day of classes, September 2, 2020, Miami-Dade County students and teachers reported several additional technical problems and a total of twelve intermittent cyberattacks that caused the K12 learning platform to become effectively dysfunctional. In response to the large amount of complaints from outraged parents, the Miami-Dade County school district convened a board meeting to discuss the many K12 flaws. During the meeting, the Superintendent of Public Schools of Miami-Dade County Alberto Carvalho revealed that he never signed the $ 15.3 million no-bid contract with K12 and the school district never paid K12 for the provision of its services and products.
With this news, the price of K12 common shares fell 10.5% over two trading sessions, to close at $ 34.89 per share in September 3, 2020.
A week later, after another Council meeting that lasted more than 13 hours and included 400 speakers, the Miami-Dade County Public Schools Council voted to end its $ 15.3 million contract with K12 in September 10, 2020.
With this news, the price of K12 common shares fell again sharply, by 11.5%, to close at $ 30.55 per share in September 10, 2020, in exceptionally high trading volume.
Meanwhile, the Beaufort County School district in South Carolina involved K12 to provide virtual learning programs for its students. However, the introduction of the program had to be postponed until the second week of classes. Soon after, Beaufort County School district council member John Dowling he said he had lost confidence in the K12’s ability to provide educational solutions for the district and decided to terminate the contract, which happened two days later.
With this news, the price of K12 common shares fell 4.9%, to close at $ 27.21 per share in September 18, 2020, in exceptionally high trading volume.
The Pomerantz Firm, with offices in New York, Chicago, Los Angeles, and Paris is recognized as one of the leading companies in the areas of corporate litigation, securities and antitrust. Founded late Abraham L. Pomerantz, known as the dean of the collective action bar, Pomerantz Firm was a pioneer in the field of collective action with securities. Today, more than 80 years later, the Pomerantz Office continues in the tradition it has established, fighting for the rights of victims of securities fraud, breach of fiduciary duty and corporate misconduct. The firm recovered several million dollar compensation awards on behalf of class members. See www.pomerantzlaw.com.
CONTACT:
Robert S. Willoughby
Pomerantz LLP
[email protected]
888-476-6529 extension 7980
SOURCE Pomerantz LLP
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