Bridgepoint Education, Inc.
- Company Name
- Bridgepoint Education, Inc.
- Stock Symbol
- Class Period
- March 8, 2016 to March 7, 2019
- Motion Deadline
- May 10, 2019
- Southern District of California
The complaint charges Bridgepoint and certain of its officers with violations of the Securities Exchange Act of 1934. Bridgepoint, together with its subsidiaries, provides postsecondary education services in the United States. Bridgepoint offers its programs online and at its campuses. As of December 31, 2017, its institutions offered approximately 1,200 courses and 80 degree programs, with 45,730 students enrolled.
As a means of increasing enrollment, the Company formed various corporate partnerships with employers to offer their employees a way to pursue and complete a college degree without incurring any student debt, referred to as the Corporate Full Tuition Grant (“FTG”) program. In 2017, enrollments in the FTG program accounted for approximately 10% of Bridgepoint’s total enrollment.
The complaint alleges that throughout the Class Period, defendants made materially false and misleading statements and/or failed to disclose adverse information regarding the Company’s business, operations and financial results. Specifically, defendants made false and misleading statements and/or failed to disclose that: (i) Bridgepoint’s processes for recording revenue for its FTG program were inaccurate; (ii) Bridgepoint maintained deficient internal controls; and (iii) due to the foregoing deficiencies, Bridgepoint was prone to and did commit material accounting errors related to revenue, provision for bad debts, accounts receivable and deferred revenue, which resulted in the overstatement of revenue and expenses. As a result of this information being withheld from the market, Bridgepoint securities traded at artificially inflated prices during the Class Period, with its stock price reaching a high of more than $15 per share.
Then on March 7, 2019, Bridgepoint filed a current report on Form 8-K disclosing that “the Company’s previously issued unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2018 (the ‘Restated Periods’) should no longer be relied upon because of errors.” According to the Form 8-K, the Company had “determined that the process used for recording the revenue for the Full Tuition Grant program portion of [its] student contracts and the related judgments and estimates were not designed with sufficient precision. As a result, the Company identified errors, relating to revenue, provision for bad debts, accounts receivable and deferred revenue, which resulted in the overstatement of revenue and expenses for the Restated Periods. The errors . . . were material to the Restated Periods and will be corrected in the restatement of [the Company’s] financial statements for the Restated Periods.” The Company also disclosed it had “identified two material weaknesses in internal control over financial reporting related to 1) control design in the accounting for revenue related to the Full Tuition Grant program and 2) operation of review controls over unusual or non-recurring and significant transactions.”
On this news, Bridgepoint’s stock price fell $3.21 per share, or over 34%, to close at $6.22 per share on March 7, 2019.