eHealth, Inc. Class Action Lawsuit
- Company Name
- eHealth, Inc.
- Stock Symbol
- Class Period
- March 19, 2018 to April 7, 2020
- Northern District of California
Notice of Lead Plaintiff Deadline for Shareholders in the eHealth, Inc. Securities Class Action Lawsuit
Robbins Geller Rudman & Dowd LLP announces that a securities class action lawsuit has been filed in the Northern District of California on behalf of purchasers of eHealth, Inc. (NASDAQ:EHTH) common stock between March 19, 2018 and April 7, 2020 (the “Class Period”). The case is captioned Patel v. eHealth, Inc., No. 20-cv-2395, and is assigned to Judge Jon S. Tigar. The eHealth securities class action lawsuit charges eHealth and certain of its officers with violations of the Securities Exchange Act of 1934.
eHealth is a health insurance marketplace with a technology and service platform that provides consumer engagement, education, and health insurance enrollment solutions.
The eHealth securities class action alleges that during the Class period, defendants misrepresented and/or failed to disclose adverse information regarding eHealth’s business and operations, including information regarding eHealth’s highly aggressive accounting and modeling assumptions, its skyrocketing rate of member churn resulting from eHealth’s pursuit of low quality, loss-making growth, and its reliance on direct-response television advertising, which attracts unprofitable, high-churn enrollees. As a result of defendants’ misrepresentations and omissions, the price of eHealth common stock was artificially inflated to more than $146 per share during the Class Period.
On April 8, 2020, Muddy Waters Research published a report stating that the Company and its management were using highly aggressive accounting practices designed to conceal the Company’s unprofitability and to make the Company’s prospects appear far more robust than they really were. Muddy Waters wrote that eHealth’s “highly aggressive accounting masks what we believe is a significantly unprofitable business.” The report also stated that eHealth’s “persistence assumptions in its [long-term value (‘LTV’)] model seem highly aggressive when compared to reality,” that “[a]fter [Accounting Standards Codification] 606 went into effect, member churn immediately skyrocketed,” and that eHealth “is pursuing low quality, lossmaking growth while its LTVs are based on lower churn, pre-growth cohorts.” Muddy Waters concluded that “the key driver of growth since 2018 has been [the Company’s] reliance on Direct Response television advertising, which attracts an unprofitable, high churn enrollee. To generate this unprofitable growth, [eHealth] has been incinerating cash, which we expect it to continue to do until this value destruction slows down or stops. [eHealth] management is, in our view, running a massive stock promotion.” On this news, the price of eHealth stock fell from an April 7, 2020 closing price of $116.02 per share to an April 8, 2020 closing price of $103.20 per share, a one-day drop of $12.82 per share, or approximately 12%.
Robbins Geller Rudman & Dowd LLP is one of the world’s leading law firms representing investors in securities class action litigation. With 200 lawyers in 9 offices, Robbins Geller has obtained many of the largest securities class action recoveries in history. For seven consecutive years, ISS Securities Class Action Services has ranked the Firm in its annual SCAS Top 50 Report as one of the top law firms in the world in both amount recovered for shareholders and total number of class action settlements. Robbins Geller attorneys have helped shape the securities laws and have recovered tens of billions of dollars on behalf of aggrieved victims. Beyond securing financial recoveries for defrauded investors, Robbins Geller also specializes in implementing corporate governance reforms, helping to improve the financial markets for investors worldwide. Robbins Geller attorneys are consistently recognized by courts, professional organizations and the media as leading lawyers in the industry.