Class Action Filed Against eHealth, Inc. On Behalf of EHTH Investors Who Purchased, Or Otherwise Acquired, eHealth Common Stock Between March 19, 2018 and April 7, 2020, Both Dates Inclusive – EHTH Investors Who Suffered Losses Encouraged To Contact Kehoe Law Firm, P.C.
Kehoe Law Firm, P.C. is making investors aware that on April 8, 2020, a class action lawsuit was filed against eHealth, Inc. (“eHealth” or the “Company”) (NASDAQ: EHTH) on behalf all investors who purchased, or otherwise acquired, eHealth common stock between March 19, 2018 and April 7, 2020, inclusive (the “Class Period”), seeking to recover damages caused by the eHealth Defendants’ alleged violations of the federal securities laws and to pursue remedies under §§10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by the SEC, 17 C.F.R. § 240.10b-5.
According to the complaint the eHealth Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts to investors. Specifically, the eHealth Defendants misrepresented and/or failed 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, loss-making 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.
The complaint alleges that
[b]efore the markets opened on April 8, 2020, analyst Muddy Waters Research 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 LTV2 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, the stock plummeted from its April 7, 2020 closing price of $116.02 per share to an April 8, 2020 closing price of $103.20 per share, a one day drop of $12.82 or approximately 12%. [Emphasis in original and added.]
eHelath investors who purchased, or otherwise acquired, EHTH securities during the Class Period and suffered losses are encouraged to contact either Michael Yarnoff, Esq., (215) 792-6676, Ext. 804, [email protected], [email protected], or John Kehoe, Esq., (215) 792-6676, Ext. 801, [email protected], to discuss the class action lawsuit or potential legal claims.