NEW YORK, May 20, 2020 /PRNewswire/ -- Faruqi & Faruqi, LLP, a leading national securities law firm, reminds investors in eHealth, Inc. ("eHealth" or the "Company") of the June 8, 2020 deadline to seek the role of lead plaintiff in a federal securities class action that has been filed against the Company.
If you invested in eHealth stock or options between March 19, 2018 and April 7, 2020 and would like to discuss your legal rights, click here: www.faruqilaw.com/EHTH. There is no cost or obligation to you.
You can also contact us by calling Richard Gonnello toll free at 877-247-4292 or at 212-983-9330 or by sending an e-mail to [email protected]
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Attn: Richard Gonnello, Esq.
Telephone: (877) 247-4292 or (212) 983-9330
The lawsuit has been filed in the U.S. District Court for the Northern District of California on behalf of all those who purchased eHealth securities between March 19, 2018 and April 7, 2020 (the "Class Period"). The case, Patel v. eHealth, Inc. et al., No. 20-cv-02395 was filed on April 8, 2020.
The lawsuit focuses on whether the Company and its executives violated federal securities laws by misrepresented and/or failing to disclose to investors: (1) its highly aggressive accounting and modeling assumptions; (2) its skyrocketing rate of member churn, resulting from eHealth's pursuit of low quality, lossmaking growth; (3) its reliance on direct response television advertising, which attracts an unprofitable, high churn enrollee; and (4) as a result of the foregoing, Defendants' public statements were materially false and misleading at all relevant times.
Specifically, on April 8, 2020 before market open, Muddy Waters Research ("Muddy Waters") published a report in which it wrote that "EHTH's highly aggressive accounting masks what we believe is a significantly unprofitable business." Muddy Waters continued that "EHTH's persistence assumptions in its LTV model seem highly aggressive when compared to reality," that "[a]fter ASC 606 went into effect, member churn immediately skyrocketed," and that "EHTH is pursuing low quality, lossmaking growth while its LTVs are based on lower churn, pre-growth cohorts." Furthermore, Muddy Waters concluded that "the key driver of growth since 2018 has been EHTH's reliance on Direct Response television advertising, which attracts an unprofitable, high churn enrollee. To generate this unprofitable growth, EHTH has been incinerating cash, which we expect it to continue to do until this value destruction slows down or stops. EHTH management is, in our view, running a massive stock promotion."
On this news, eHealth's stock fell from a closing price of $116.90 per share on April 7, 2020 $103.2 per share on April 8, 2020—a $13.70 or 11.72% drop.
The court-appointed lead plaintiff is the investor with the largest financial interest in the relief sought by the class who is adequate and typical of class members who directs and oversees the litigation on behalf of the putative class. Any member of the putative class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member. Your ability to share in any recovery is not affected by the decision to serve as a lead plaintiff or not.
Faruqi & Faruqi, LLP also encourages anyone with information regarding eHealth's conduct to contact the firm, including whistleblowers, former employees, shareholders and others.
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