According to the press release, investors of Bridgepoint Education, Inc. filed a class action lawsuit in the United States District Court for the Southern District of California on behalf of a class (the “Class”) comprising purchasers of Bridgepoint securities between August 7, 2012 and May 30, 2014, inclusive (the “Class Period”).
Bridgepoint is a for-profit provider of postsecondary education services. The Company’s academic institutions include Ashford University and University of the Rockies, as well as online institutions. The Company’s institutions deliver programs primarily online, as well as at their traditional campuses. The Complaint alleges that defendants made false and/or misleading statements and/or failed to disclose to investors that: (1) the Company had applied an improper revenue recognition methodology to assess collectability of funds owed by students; (2) as a result, the Company’s revenues and financial results were overstated; (3) the Company’s financial statements were not prepared in accordance with Generally Accepted Accounting Principles (“GAAP”); (4) the Company lacked adequate internal and financial controls; and (5), as a result of the foregoing, the Company’s financial statements were materially false and misleading at all relevant times.
On May 12, 2014, Bridgepoint revealed that it was unable to timely file its Quarterly Report for the 2014 fiscal first quarter because the Securities and Exchange Commission (“SEC”) had informed the Company that a reassessment of its revenue recognition policy was necessary. According to the Company, the SEC was requiring Bridgepoint to reassess whether collectability was reasonably assured on a student-by-student basis when recognizing revenue after a student’s initial enrollment upon certain changes in circumstances, such as when a student loses financial aid eligibility. Following this news, shares of Bridgepoint declined nearly 9%, to close on May 12, 2014, at $14.51 per share, on unusually heavy volume.
Furthermore, on May 30, 2014, Bridgepoint announced that its financial statements filed with the SEC for the years ended December 31, 2011 and December 31, 2012, as well as the financial statements issued for the quarters ended March 31, 2012, June 30, 2012 and September 30, 2012, should no longer be relied upon. According to the Company, these financial statements contained errors related to revenue recognition that resulted in material misstatements of revenue, bad debt expense and accounts receivable.
On July 25, 2016, the Court issued an Order granting Defendants' Motion to Dismiss. Plaintiffs were given leave to file an amended complaint, which they did on September 9.