Chegg, Inc. (CHGG) Made Material Misstatements Regarding its Business Prospects
A class action was filed on behalf of all purchasers of Chegg, Inc. (NYSE: CHGG) common stock between May 20, 2020 and November 1, 2021. The complaint alleges violations of the Securities Exchange Act of 1934. Chegg is a provider of online research tools, online tutoring services, digital and physical textbook rentals, and other educational resources.
According to the complaint, during the class period, defendants falsely touted that the Company was “in a unique position to impact the future of the higher education system” and that the primary cause of the Company’s success was “[o]ur strong brand and momentum” which would supposedly allow Chegg “to continue to grow and take advantage of the ever-expanding opportunities in the learner economy.” Based on these misstatements, the market price of Chegg’s common stock more than tripled during the class period, reaching a high of more than $115 per share by February 16, 2021.
With the stock artificially inflated, several of Chegg’s senior officers and directors sold more than $90 million of their personally held shares. The Company also took advantage of the artificially inflated trading price by selling more than $1 billion of common stock to investors in the February 18, 2021 secondary offering at the artificially inflated price of $102 per share.
In reality, Chegg’s growth had been a temporary effect of the COVID-19 pandemic that resulted in remote education for the majority of U.S. students, and once the pandemic-related restrictions eased and students returned to campuses, Chegg’s growth trend would end. Further, Chegg’s subscriber and revenue growth were due to the facilitation of cheating – an unstable business proposition – rather than the strength of its business model or the acumen of its senior executives and directors.
On November 1, 2021, Chegg revealed its financial results for the first quarter in which students returned to campus across the U.S., revealing fewer-then-expected enrollments while declining to provide 2022 guidance. On this news, Chegg’s stock plummeted nearly 50%, losing more than $4.3 billion in market capitalization.
If you purchased shares of Chegg, Inc. (CHGG) between May 20, 2020 and November 1, 2021, you have until February 21, 2022, to ask the court to appoint you lead plaintiff for the class.
All representation is on a contingency fee basis. Shareholders pay no fees or expenses.
