According to the Complaint, Chegg, Inc. ("Chegg," or the "Company") is a direct-to-student learning platform that provides educational materials and services to high school and college students.
Plaintiff's law firm issued a press release on September 27, 2018, announcing the lawsuit. According to the press release, on September 25, 2018, Chegg reported that it had “learned that on or around April 29, 2018, an unauthorized party gained access to a Company database that hosts user data for chegg.com and certain of the Company’s family of brands such as EasyBib.” The Company reported that approximately 40 million users’ data, including username, email address, shipping address, and hashed password, could have been obtained and that an investigation into the incident was ongoing. On this news, shares of Chegg fell over 12% to close at $28.42 on September 26, 2018, thereby injuring investors.
The Complaint alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that the Company lacked adequate security measures to protect users’ data; (2) that the Company lacked the internal controls and procedures to detect unauthorized access to its systems and to its data; (3) that as a result, the Company would incur additional expenses and litigation risks; and (4) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially false and/or misleading and/or lacked a reasonable basis.