According to a press release dated November 05, 2010, the complaint charges Capella and certain of its officers and executives with violations of the Exchange Act. Capella is a national leader in online education and its wholly-owned subsidiary Capella University is a regionally accredited online university. Capella offers graduate degree programs in business, information technology, education, human services, psychology, public health, and public safety, and bachelor’s degree programs in business, information technology, and public safety. These programs are designed to meet the needs of working adults.
The complaint alleges that throughout the Class Period, defendants issued materially false and misleading statements regarding the Company’s business and financial results. Specifically, defendants failed to disclose that: (i) the Company had engaged in improper and deceptive recruiting and financial aid lending practices and, due to the government’s scrutiny into the for-profit education sector, the Company would be unable to continue these practices in the future; (ii) the Company failed to maintain proper internal controls; (iii) many of the Company’s programs were in jeopardy of losing their eligibility for federal financial aid; and (iv) as a result of the foregoing, defendants’ statements regarding the Company’s financial performance and expected earnings were false and misleading and lacked a reasonable basis when made.
On August 13, 2010, after the market closed, the U.S. Department of Education released data on federal student-loan repayment rates at the nation’s colleges and universities. The data showed that repayment rates were 54% at public colleges and 56% at private non-profit institutions, compared to just 36% at for-profit colleges. Specifically, the data showed that the repayment rate at Capella was just 40%. On this news, the price of Capella stock dropped 13.19%, or $9.26 per share, from a closing price of $70.20 per share on August 13, 2010 to a closing price of $60.94 per share on August 16, 2010, the following trading day, on a 438% increase in trading volume.
On April 13, 2011, the Court issued an Order consolidating the case, appointing Oklahoma Firefighters Pension and Retirement System as lead plaintiff and approving of its selection of counsel. On June 27, 2011, the lead plaintiff filed an Amended Class Action Complaint, expanding the alleged the class period and naming an additional company officer as a named defendant in the action.
On June 1, 2012, the Court issued an Order granting defendants' motion to dismiss and dismissing this action with prejudice.