SAN DIEGO–(BUSINESS WIRE)–Robbins Geller Rudman & Dowd LLP filed a class action lawsuit seeking to represent purchasers of Zhangmen Education Inc. (NYSE: ZME) American Depositary Shares (“ADSs”) in or traceable to Zhangmen Education’s initial public offering conducted on or about June 8, 2021 (“IPO”), pursuant to the IPO prospectus (the “Prospectus”) and Form F-1 registration statement, as amended (together with the Prospectus, the “Registration Statement”). The Zhangmen Education class action lawsuit charges Zhangmen Education, certain of its top executives, and the underwriters of the IPO with violations of the Securities Act of 1933. The Zhangmen Education class action lawsuit was commenced on November 19, 2021 in the Southern District of New York and is captioned Banerjee v. Zhangmen Education Inc.
The plaintiff is represented by Robbins Geller, which has extensive experience in prosecuting investor class actions including actions involving financial fraud. You can view a copy of the complaint by clicking here.
If you wish to serve as lead plaintiff of the Zhangmen Education class action lawsuit, please provide your information by clicking here. You can also contact attorney J.C. Sanchez of Robbins Geller by calling 800/449-4900 or via e-mail at firstname.lastname@example.org. Lead plaintiff motions for the Zhangmen Education class action lawsuit must be filed with the court no later than January 18, 2022.
CASE ALLEGATIONS: Zhangmen Education provides personalized online tutoring services to K-12 students in the People’s Republic of China (“PRC”). The rapid rate of growth in PRC’s online education market has led to a sharp rise in fraudulent activity, including false advertising, fabrication of teacher qualifications, exaggerated student performance, and price fraud. In response to these scandals, the Chinese government sought to clean up the industry by adopting stringent new regulations shortly before the Zhangmen Education IPO. But as the Zhangmen Education class action lawsuit alleges, the true scope and effect of these proposed measures were known to but undisclosed by defendants prior to the IPO and were reasonably likely to have a material adverse effect on Zhangmen Education’s business and future operating results.
Specifically, the Zhangmen Education class action lawsuit alleges that the IPO’s Registration Statement failed to disclose that: (a) PRC authorities were in the process of implementing sweeping new regulatory reforms on the private education industry in China including, among others, prohibitions on: (i) profit-making by private education companies, (ii) engaging in core-curriculum tutoring on weekends and vacations, and (iii) capital-raising by companies like Zhangmen Education; (b) the known risks, events, and uncertainties noted in the Registration Statement were reasonably likely to have a material adverse effect on Zhangmen Education’s business; and (c) based on the foregoing, the statements in the Registration Statement concerning Zhangmen Education’s historical financial performance, market demand, and industry trends were materially incomplete, inaccurate, and misleading.
On July 23, 2021 – less than two months after the IPO – PRC unveiled a sweeping overhaul of its education sector, banning companies that teach the school curriculum from making profits, raising capital, or going public. These drastic measures effectively ended any potential growth in the for-profit tutoring sector in PRC.
Then, on July 26, 2021, Zhangmen Education issued a release providing an update on the new PRC policies, admitting among other things that Zhangmen Education expected “the Guidelines to have material impacts on our existing business operations, financial condition and corporate structure.”
Thereafter, on August 25, 2021, Zhangmen Education issued a press release providing a further update on similar policies implemented by the Shanghai government and the implications for Zhangmen Education’s business, stating for example that: (a) “No new provider of after-school tutoring services on academic subjects in China’s compulsory education system (‘Academic AST’) will be approved, while existing Academic AST providers shall be subject to review and re-registration as non-profit organizations”; (b) “Tuition fees for Academic AST shall follow the guidelines from the government to prevent any excessive charging or excessive profit-seeking activities”; and (c) “AST advertising shall be subject to enhanced oversight.”
Finally, on November 19, 2021, Zhangmen Education announced that its auditor, Deloitte Touche Tohmatsu Certified Public Accountants LLP, had voluntarily resigned.
Subsequent to the IPO, the price of Zhangmen Education ADSs plummeted. As of the filing of the Zhangmen Education class action lawsuit, Zhangmen Education ADSs trade more than 80% below the IPO price.
THE LEAD PLAINTIFF PROCESS: The Private Securities Litigation Reform Act of 1995 permits any investor who purchased Zhangmen Education ADSs in or traceable to the IPO pursuant to the Registration Statement to seek appointment as lead plaintiff in the Zhangmen Education class action lawsuit. A lead plaintiff is generally the movant with the greatest financial interest in the relief sought by the putative class who is also typical and adequate of the putative class. A lead plaintiff acts on behalf of all other class members in directing the Zhangmen Education class action lawsuit. The lead plaintiff can select a law firm of its choice to litigate the Zhangmen Education class action lawsuit. An investor’s ability to share in any potential future recovery of the Zhangmen Education class action lawsuit is not dependent upon serving as lead plaintiff.
ABOUT ROBBINS GELLER RUDMAN & DOWD LLP: With 200 lawyers in 9 offices nationwide, Robbins Geller Rudman & Dowd LLP is the largest U.S. law firm representing investors in securities class actions. Robbins Geller attorneys have obtained many of the largest shareholder recoveries in history, including the largest securities class action recovery ever – $7.2 billion – in In re Enron Corp. Sec. Litig. The 2020 ISS Securities Class Action Services Top 50 Report ranked Robbins Geller first for recovering $1.6 billion for investors last year, more than double the amount recovered by any other securities plaintiffs’ firm. Please visit http://www.rgrdlaw.com for more information.
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