NEW YORK, July 3, 2020 /PRNewswire/ -- Pomerantz LLP announces that a class action lawsuit has been filed against Grand Canyon Education Corporation ("Grand Canyon" or the "Company")(NASDAQ: LOPE) and certain of its officers. The class action, filed in United States District Court for the District of Delaware, is on behalf of a class consisting of all persons and entities other than Defendants who purchased or otherwise, acquired Grand Canyon securities between January 5, 2018, and January 27, 2020, inclusive (the "Class Period"). The claims asserted herein are alleged against Grand Canyon and certain of the Company's senior executives (collectively, "Defendants"), and arise under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and the rules promulgated thereunder, including SEC Rule 10b-5, 17 C.F.R. § 240.10b-5.
If you are a shareholder who purchased Grand Canyon securities during the class period, you have until July 13, 2020, to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby at email@example.com or 888.476.6529 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased.
[Click here for information about joining the class action]
Grand Canyon is an education services company incorporated in the State of Delaware. This case concerns the Company's July 2018 spin-off of its education assets through a sale to a purported non-profit entity, Grand Canyon University ("GCU"). Before the spin-off, Grand Canyon had owned and operated a for-profit university with a physical campus and through online programs. After the spin-off, Grand Canyon would purportedly become a third-party provider of education services to GCU and potentially other universities, and GCU would operate as a separate, non-profit entity no longer owned or operated by Grand Canyon.
The Class Period begins with Grand Canyon's January 5, 2018, announcement that it had applied to regional accreditation body the Higher Learning Commission ("HLC") for recognition of GCU as a non-profit institution. The Complaint alleges that throughout the Class Period, Grand Canyon told investors that GCU would be "independent" from Grand Canyon, that the relationship between the two entities would "no longer be as owner and operator, but as a third party contract party," and that GCU was "not a related party" to Grand Canyon. Following the spin-off, Grand Canyon consistently reported growth in net income and adjusted earnings before interest, taxes, depreciation, and amortization ("EBITDA"), and touted the success of its transition into the role of a third-party services provider.
In reality, GCU functioned as an off-balance-sheet entity to which Grand Canyon was able to funnel expenses and costs in exchange for a disproportionate amount of revenue, thereby inflating Grand Canyon's financial results. In addition, GCU was not a proper non-profit organization but rather remained under the control of Grand Canyon through the Master Services Agreement ("MSA") and by virtue of Grand Canyon's employees serving as the executives who managed GCU.
The truth was revealed in a series of corrective disclosures. First, on September 9, 2019, short-seller Citron Research ("Citron") published a report examining Grand Canyon's financials and concluding that the Company "is stuffing GCU with expenses to inflate its profitability and as a result bankrupting GCU." In response to this disclosure, the price of Grand Canyon stock declined approximately 5% intraday on September 9, 2019, to a low of $104.20 per share, and closed at $109.62 per share on September 10, 2019.
Then, after the close of the market on November 6, 2019, Grand Canyon announced that it had received a letter from the U.S. Department of Education ("DOE") denying its application for designation of GCU as a non-profit. In response to this disclosure, the price of Grand Canyon stock declined approximately 4% to close at $88.08 per share on November 7, 2019.
On January 28, 2020, Citron published a second report expanding on the DOE's findings based on hundreds of pages of supporting documentation from Grand Canyon, which Citron obtained through a Freedom of Information Act ("FOIA") request. Citron concluded that Grand Canyon 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 shares declined approximately 8% to close at $84.07 per share on January 28, 2020.
The Pomerantz Firm, with offices in New York, Chicago, Los Angeles, and Paris, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, the Pomerantz Firm pioneered the field of securities class actions. Today, more than 80 years later, the Pomerantz Firm continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members. See www.pomerantzlaw.com
Robert S. Willoughby
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SOURCE Pomerantz LLP