Zhangmen Education Inc.

  • Active

Investigation
07/26/2021

Initial Lawsuit
11/19/2021

Lawsuit Progression
02/11/2022

Investigation

  • Public Offering Date
    June 8, 2021
  • Proposed Claim
    Securities Violation

This investigation is about Zhangmen Eductation’s statements made during its initial public offering (IPO). Following the IPO, China entered into regulatory reforms in the private education industry, greatly impacting Zhangmen’s financials.

This post is open for investors to gather facts, and findings and track their exposure to related lawsuits. We invite investors and shareholders to contribute to this investigation for their own benefit, add events to the factual timeline below and vote on events’ pertinence.

A lawsuit was subsequently filed. We update this post regularly.

Main Event

Zhangmen Responds to the New Guidelines

07/26/2021

Company Statement

Zhangmen responds to the new guidelines issued on July 24, 2021 by the General Office of the Communist Party of China Central Committee and the General Office of the State Council:

“The Guidelines, among other things, require that all institutions offering after-school tutoring on academic subjects in compulsory education be registered as non-profit organizations, obtain approval from the relevant regulatory authorities, and comply with various operational requirements with respect to class hours, faculty qualifications, tuition standards, advertising and others. In addition, the Guidelines prohibit all such tutoring businesses from raising funds through stock exchange listings or other capital-related activities. Foreign investments in school curriculum-based tutoring institutions through variable interest entity (VIE) arrangements, mergers and acquisitions or otherwise are also prohibited.”

“Listed companies are banned from raising capital through equity offerings to invest in businesses offering tutoring on academic subjects in compulsory education. The Guidelines require that all businesses that have already violated these rules take corrective measures as appropriate. The Guidelines also provide that institutions offering after-school tutoring on high school curriculum, which is not part of compulsory education, shall also take into consideration of the Guidelines when conducting activities.”

The stock impact compares the closing price immediately preceding the date of the event and the following closing price. The price difference also reflects the overall mix of information.

Stock Impact

Close Previous close Price variation Percentage variation
$4.97 $6.18 $-1.21 -19.66%
See more on Factual Timeline

Initial Lawsuit

First Complaint - 11/19/2021

A Zhangmen Education Inc. investor filed a federal securities class action lawsuit on behalf of all those who purchased or otherwise acquired the American depositary shares (ADSs) of Zhangmen in or traceable to the company’s initial public offering (IPO), conducted on or about June 8, 2021.

  • Filing Date
    11/19/2021
  • Public Offering Date
    06/08/2021
  • Transgression
    Securities Violation
  • Filing Firms
    Johnson Fistel, LLP
    Robbins Geller Rudman & Dowd LLP
  • Case Title
    Banerjee v. Zhangmen Education Inc. et al
  • Docket Number
    1:21-cv-09634
  • Court
    New York Southern District Court
  • Free File
    Complaint

Allegations

According to the complaint, defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the company’s business, operations, and prospects. Specifically, defendants allegedly failed to disclose to investors that:

(a) “that People’s Republic of China (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;”
(b) “PRC authorities were in the midst of a far-ranging regulatory crackdown on consumer fraud and market abuses in the for profit tutoring industry at the time of the IPO (including for Zhangmen’s own misconduct) and formulating a draconian set of rules and regulations following the Communist Party’s March 2021 Parliamentary Session that included an outright ban on profit-making in the tutoring industry, strict limits on extracurricular educational activities which would severely curtail Zhangmen’s business, and a prohibition on capital-raising and other financial activities critical to the Company’s growth, expansion and continued operation.”
(c) “that the known risks, events and uncertainties noted in (a) above were
reasonably likely to have a material adverse effect on the company’s business; and”
(d) “that based on the foregoing, the statements in the registration statement concerning the company’s historical financial performance, market demand, and industry trends were materially incomplete, inaccurate and misleading.”

Defendants

  • Company
    Zhangmen Education Inc.
  • Chief Executive Officer
    Yi Zhang
  • Chief Financial Officer
    Ricky Kwok Yin Ng
  • Founder
    Teng Yu
  • Company
    Cogency Global Inc.
  • Authorized Representative
    Colleen A. De Vries
  • Underwriter
    Morgan Stanley & Co. LLC
  • Underwriter
    Credit Suisse Securities (USA) LLC

Lawsuit progression

  • Docket Number
    1:21-cv-09634
  • Court
    New York Southern District Court

Lead Counsel

02/11/2022

The court issued an order appointing the lead plaintiff and lead counsel.

Amended Complaint

04/12/2022

Lead plaintiff filed this securities class action lawsuit on behalf of all those who purchased or otherwise acquired the American depositary shares (ADSs) of Zhangmen in or traceable to its initial public offering (IPO) on or about June 8, 2021, pursuant to the IPO prospectus and Form F-1 registration statement, as amended.

Motion to Dismiss

06/10/2022

A motion to dismiss was filed with the court.

[stockdio-historical-chart symbol=”ZME” stockExchange=”NYSENasdaq” width=”500″ height=”330″ motif=”blinds” palette=”humanity” includeVolume=false]

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