A first class-action lawsuit against 2U (NASDAQ: TWOU) is being filed, as more investigations are being conducted. [See update below]
The Los Angeles-based Glancy, Prongay & Murray LLP announced on August 7 that filed a class-action lawsuit in the U.S. District Court for the Southern District of New York.
The case captioned Harper v. 2U. Inc., et al., goes “on behalf of persons and entities that purchased or otherwise acquired 2U securities between February 25, 2019, and July 30, 2019.“ Plaintiff pursues claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).
Glancy, Prongay & Murray described the case stating:
“On May 7, 2019, the Company lowered its revenue guidance for fiscal 2019 to a range of $534 to $537 million, from prior guidance range of $546.6 to $550.8 million, due to declining average enrollments in some of its largest graduate programs.
On this news, the Company’s share price fell $15.16, or nearly 26%, to close at $44.77 per share on May 8, 2019, on unusually heavy trading volume.
Then on July 30, 2019, after the market closed, the Company reported a larger-than-expected loss for the second quarter of 2019. The Company also revised its guidance for fiscal 2019, expecting a net loss between $157.5 and $151.5 million, compared to prior net loss guidance between $79.0 and $77.2 million, because it would “moderate [its] grad program launch cadence.”
On this news, the Company’s share price fell $23.70, or nearly 65%, to close at $12.80 per share on July 31, 2019, on unusually heavy trading volume.”
The firm alleges that 2U “made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, it failed to disclose to investors: (1) that the Company faced increasing competition in online education and particularly regarding graduate programs; (2) that the Company faced certain program-specific issues that negatively impacted its performance; (3) that, as a result, the Company’s business model was not sustainable; (4) that the Company would slow its program launches; and (5) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.”
UPDATE, AUGUST 9: MANY MORE CLASS-ACTION LAWSUITS FILED
2U Inc. is facing an increasing number of class-action lawsuits filed from at least thirteen more law firms of behalf of shareholders. Aaron Harper, Kahn Swick & Foti, Robbins Geller Rudman & Dowd, Levi & Korsinsky, Vincent Wong, Bragar Eagel & Squire, Hagens Berman, Gainey McKenna & Egleston, Faruqi & Faruqui, Federman & Sherwood, Howard G. Smith, Kuznicki Law, Bronstein, Gewirtz & Grossman.
INVESTIGATIONS FOR POSSIBLE VIOLATIONS OF FEDERAL SECURITIES LAWS
In addition to those suits, more law firms are initiating investigations into 2U with respect to possible violations of federal securities laws.
- The last one is Schall Law, a national shareholder rights litigation firm. “The investigation focuses on whether the Company issued false and/or misleading statements and/or failed to disclose information pertinent to investors.”
- Oklahoma City-based Federman & Sherwood focuses its investigation “on allegations that on July 30, 2019, after the close of trading, 2U disclosed its financial results for the quarter ended June 30, 2019.”
- San Francisco-based Hagens Berman Sobol Shapiro’s investigation is related to possible violations of the federal securities laws. “The investigation centers on the accuracy of 2U’s and senior management’s statements about the sustainability of the Company’s business model.” “We’re focused on investors’ losses and the extent to which the Company and current or former senior executives may have misled investors about the accuracy and reasonableness of their previously-issued guidance,” said Hagens Berman partner Reed Kathrein.This firm is also calling whistleblowers, persons with non-public information regarding 2U.
- On August 5, Bronstein, Gewirtz & Grossman was the first law firm announcing an investigation of 2U.