Zhangmen Education Inc. (ZME) Securities Class Action:
The litigation focuses on Zhangmen’s statements leading up to its initial public offering conducted in early June 2021 about material risks the company faced concerning the Peoples Republic of China’s crackdown on for-profit tutoring companies.
More specifically, the IPO offering documents emphasized the strong growth and market demand in the PRC for Zhangmen’s online K-12 one-on-one tutoring services.
According to the complaint, Defendants’ statements were materially false and misleading because they failed to disclose the PRC was implementing sweeping new regulatory reforms that prohibited (1) profit-making by private education companies, (2) engaging in core-curriculum tutoring during weekends and vacations, and (3) capital-raising by companies like Zhangmen.
Defendants’ statements were brought into serious question beginning on July 23, 2021 (less than two months after the IPO), when the PRC unveiled its overhaul of its education sector, banning companies that teach school curriculum from making profits, raising capital or going public.
Zhangmen soon admitted the overhaul would materially and negatively impact nearly all aspects of its business and that all existing PRC education system providers, like Zhangmen, are subject to review and re-registration as non-profit organizations.
These events sent the price of Zhangmen shares sharply below its $11.50 IPO price.
“We’re focused on investors’ losses and proving Zhangmen concealed the PRC reforms that were underway at the time of its IPO, reforms that essentially invalidated its business model,” said Reed Kathrein, the Hagens Berman partner leading the investigation.
If you invested in Zhangmen and have significant losses, or have knowledge that may assist the firm’s investigation, click here to discuss your legal rights with Hagens Berman.
Whistleblowers: Persons with non-public information regarding Zhangmen should consider their options to help in the investigation or take advantage of the SEC Whistleblower program. Under the new program, whistleblowers who provide original information may receive rewards totaling up to 30 percent of any successful recovery made by the SEC. For more information, call Reed Kathrein at 844-916-0895 or email ZME@hbsslaw.com.
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Reed Kathrein, 844-916-0895