Scott+Scott Attorneys at Law LLP Announces Filing of Securities Class Action Against New Oriental Education & Technology Group Inc. (EDU); Lead Plaintiff Deadline is April 5, 2022
NEW YORK, Feb. 07, 2022 (GLOBE NEWSWIRE) — Scott+Scott Attorneys at Law LLP (“Scott+Scott”), an international shareholder and consumer rights litigation firm, advises investors that a securities class action lawsuit has been filed against New Oriental Education & Technology Group Inc. (“New Oriental”) (NYSE: EDU) and certain other defendants, alleging violations of federal securities laws. If you purchased American Depository Shares (“ADSs” or “shares”) of New Oriental between April 24, 2018 and July 22, 2021, inclusive, you are encouraged to contact attorney Rhiana Swartz for additional information at (844) 818-6980, or at [email protected]. The lead plaintiff deadline is April 5, 2022.
New Oriental provides educational programs, services, and products to students across China and delivers online courses through its online learning platforms.
From March 4, 2021 through March 11, 2021, China held its annual “Two Sessions” parliamentary meetings, where the two main political bodies of China meet, discuss, and reveal plans for China’s policies involving the economy, military, trade, diplomacy, the environment, and more. New Oriental’s founder and Chairman of the Board of Directors during the Class period, defendant Michael Minhong Yu, as a member of the National People’s Congress, was a delegate at the Two Sessions parliamentary meetings.
The lawsuit alleges that defendants made false and misleading statements and failed to disclose that: (i) New Oriental’s revenue and operational growth was the result of deceptive marketing tactics and abusive business practices that flouted Chinese regulations and policies and exposed New Oriental to an extreme risk that more draconian measures would be imposed on New Oriental; (ii) New Oriental had engaged in misleading and fraudulent advertising practices, including the provision of false and misleading discount information designed to obfuscate the true cost of New Oriental’s programs to its customers; (iii) New Oriental had falsified teacher qualifications and experience to increase student enrollments; (iv) New Oriental had defied prior government warnings against linking school enrollments with the provision of private tutoring services; (v) as a result, New Oriental was subject to an extreme undisclosed risk of adverse enforcement actions, regulatory fines and penalties, and the imposition of new rules and regulations adverse to New Oriental’s business and interests; (vi) the new rules, regulations, and policies to be implemented by the Chinese government following the Two Sessions parliamentary meetings were far more severe than represented to investors by defendants and in fact posed an existential threat to New Oriental and its business; and (vii) consequently, defendants’ positive statements about New Oriental’s business, operations, and prospects were materially misleading and lacked a reasonable factual basis.
As news of the Chinese government’s focus during the Two Sessions parliamentary meetings on the after-school tutoring industry spread, the price of New Oriental ADSs began to drop from $18.24 when the market closed on March 5, 2021, to $14.50 by April 1, 2021, a nearly 21% decline.
Then, on May 12, 2021, news reports revealed that the impending government crackdown would be further reaching and more drastic than previously publicly known. Sources stated that anticipated rules would include measures such as banning on-campus tutoring classes, the provision of tutoring services during weekend hours, and the imposition of industry-wide fee limitations. On this news, the price of New Oriental ADSs dropped from $14.28 when the market closed on May 11, 2021, to $11.51 when the market closed on May 13, 2021.
Then, on June 1, 2021, Chinese regulators announced that they had fined 15 off-campus training institutions, including New Oriental, for illegal activities such as false advertising and fraud. Among the violations were reportedly fabricating teacher qualifications, exaggerating the effects of training, and fabricating user reviews. New Oriental was accused of faking the teaching experience of 76 teachers, a stunning 74% of all teachers surveyed. The offending companies were hit with maximum penalties for their illegal business practices, totaling a combined 36.5 million yuan ($5.73 million). Officials stated that the crackdown on the for-profit tutoring industry had grown out of the Two Sessions parliamentary meetings held earlier in the year and followed a deluge of complaints against bad industry actors, including 155,000 complaints and reports for education and training services received by authorities in 2020 and over 47,000 similar complaints and reports received by authorities in the first quarter of 2021. Many of these complaints were against New Oriental, including a large number for problems related to difficulties in receiving appropriate refunds from New Oriental. In addition to the issues outlined above, New Oriental reportedly: (i) provided false pricing information, including by stating that courses were being offered at a 90% discount when in fact the purported regular rate was never offered; (ii) provided fraudulent teacher certifications and other falsified credentials to prospective students; (iii) engaged in false publicity and price fraud; and (iv) failed to honor its contractual commitment to students. On this news, the price of New Oriental ADSs dropped approximately 16% over a two-day period.
Finally, on July 23, 2021, China unveiled a sweeping overhaul of its education sector, banning companies that teach the school curriculum from making profits, raising capital, or going public. This drastic measure effectively ended any potential growth in the for-profit tutoring sector in China. Two days later, on July 25, 2021, New Oriental published an “update” on the new regulations, which stated that New Oriental “will follow the spirit of the Opinion and comply with relevant rules and regulations when providing educational services” and “expects such measures to have material adverse impact on its after-school tutoring services related to academic subjects in China’s compulsory education system.”
On this news, the price of New Oriental ADSs plummeted by nearly 70%, further damaging investors.
Lead Plaintiff Deadline
The Lead Plaintiff deadline in this action is April 5, 2022. Any member of the proposed Class may seek to serve as Lead Plaintiff through counsel of their choice, or may choose to do nothing and remain a member of the proposed Class.
What You Can Do
If you purchased New Oriental shares between April 24, 2018 and July 22, 2021, or if you have questions about this notice or your legal rights, you are encouraged to contact attorney Rhiana Swartz at (844) 818-6980 or [email protected].
About Scott+Scott
Scott+Scott has significant experience in prosecuting major securities, antitrust, and consumer rights actions throughout the United States. The firm represents pension funds, foundations, individuals, and other entities worldwide with offices in New York, London, Amsterdam, Connecticut, California, Virginia, and Ohio.
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CONTACT:
Rhiana Swartz
Scott+Scott Attorneys at Law LLP
230 Park Avenue, 17th Floor, New York, NY 10169
(844) 818-6980
[email protected]
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