Grand Canyon Education, Inc. Class Action Lawsuit
- Company Name
- Grand Canyon Education, Inc.
- Stock Symbol
- Class Period
- January 5, 2018 to January 27, 2020
- District of Delaware
The Grand Canyon Education, Inc. class action lawsuit charges Grand Canyon Education and certain of its officers with violations of the Securities Exchange Act of 1934 and seeks to represent purchasers of Grand Canyon Education common stock between January 5, 2018 and January 27, 2020 (the “Class Period”). The Grand Canyon Education class action lawsuit was commenced on May 12, 2020 in the District of Delaware and is captioned The City of Hialeah Employees’ Retirement System v. Grand Canyon Education, Inc., No. 20-cv-00639.
The Grand Canyon Education class action lawsuit concerns Grand Canyon Education’s July 2018 spin-off of its education assets through a sale to purported non-profit entity Grand Canyon University. Before the spin-off, Grand Canyon Education had owned and operated a for-profit university with a physical campus and through online programs. But in reality, Grand Canyon University functioned as an off-balance-sheet entity to which Grand Canyon Education was able to funnel expenses and costs in exchange for a disproportionate amount of revenue, thereby inflating Grand Canyon Education’s financial results. In addition, Grand Canyon University was not a proper non-profit organization, but rather, remained under the control of Grand Canyon Education through a Master Services Agreement and by virtue of Grand Canyon Education’s employees serving as the executives who managed Grand Canyon University.
The truth was revealed in a series of corrective disclosures. First, on September 9, 2019, Citron Research published a report examining Grand Canyon Education’s financials and concluding that Grand Canyon Education “is stuffing [Grand Canyon University] with expenses to inflate its own profitability and as a result [is] bankrupting [Grand Canyon University].” In response to this disclosure, the price of Grand Canyon Education stock declined approximately 5% on September 9, 2019 to an intraday low of $104.20 per share before closing at $109.62 per share on September 10, 2019. Then, on November 6, 2019, Grand Canyon Education announced that it had received a letter from the U.S. Department of Education (“DOE”) denying its application to designate Grand Canyon University as a non-profit. In response to this disclosure, the price of Grand Canyon Education stock declined approximately 4% to close at $88.08 per share on November 7, 2019.
Finally, on January 28, 2020, Citron Research published a second report expanding on the DOE’s findings based on hundreds of pages of supporting documentation from Grand Canyon Education that Citron Research had obtained through a Freedom of Information Act request. Citron Research concluded that Grand Canyon Education was the “educational Enron,” using a “captive non-reporting subsidiary” to “dump expenses and liabilities, while receiving a disproportionate amount of revenue at inflated margins in order to artificially inflate the stock price.” Following this disclosure, Grand Canyon Education shares declined approximately 8% to close at $84.07 per share on January 28, 2020.
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