On June 18, 2018, investors sued TAL Education Group (“TAL” or the “Company”) in United States District Court, Southern District of New York. The federal securities class action alleges that plaintiffs acquired TAL’s American Depository Shares (“ADS”) at artificially inflated prices between April 26, 2018 and June 13, 2018 (the “Class Period”). They are now seeking compensation for financial losses incurred upon public revelation of the Company’s alleged misconduct during that time. Here’s what you need to know about the TAL Edcuation class action (TAL class action):

Summary of the Allegations

Company Background

The Company (NYSE: TAL) bills itself as “a leading education and technology enterprise in China.” As such, it provides “educational services and offers comprehensive tutoring services” for students in subjects ranging from English to Chinese, physics and chemistry.

Since its inception, the Company says, it has been “committed to integrating the internet [sic] and technology into education to deliver a better study experience for children.”

Although it is incorporated in the Cayman Islands, TAL is based in Beijing and most of the students it serves are also located in China.

Summary of Facts

TAL and two of its senior officers and/or directors (the “Individual Defendants”) now stand accused of deceiving investors by lying and withholding critical information about the Company’s business practices and prospects during the Class Period.

Specifically, they are accused of omitting truthful information about certain income from SEC filings and related material. By knowingly or recklessly doing so, they allegedly caused TAL’s ADS to trade at artificially inflated prices during the time in question.

The truth emerged on June 13, 2018, when Carson Block published a report “accusing the Company of issuing fraudulent profit figures by overstating net income, net income margin and other essential accounting figures.”

A closer look…

As alleged in the June 18 complaint, TAL made several false or misleading statements in a press release issued on April 26, 2018. In it, the Company shared its “unaudited financial results” for fourth fiscal quarter and 2018 fiscal year.

In the portion of the press release devoted to TAL’s “Highlights for the Fourth Quarter of Fiscal Year, the Company stated in pertinent part: “Net income attributable to TAL increased by 102.9% to US $69.5 million from US $34.3 million in the same period of the prior year.”

The Company also stated that: “Non-GAAP net income attributable to TAL, which excluded share-based compensation expenses, increased by 83.9% to US $82.1 million from US $ 44.7 million in the same period of the prior year.”

What TAL allegedly failed to disclose, however, was that it had overstated its net income and that its net income was actually “deteriorating.”

Furthermore, in its June 13 report, Carson Block alleged that the Company had been “fraudulently overstating its profits since at least FY 2016.” Carson Block also said it estimated that the Company had overstated its net income by at least 43.6% from FY 2016 through FY2018.

Impact of the Alleged Fraud on TAL’s ADS Price and Market Capitalization

The following chart illustrates the stock price during the class period:

Actions You May Take

If you have purchased shares during the Class Period, you may join the class action as a lead plaintiff, remain a passive class member, or opt out of this litigation and pursue individual claims that may not be available to the class as a whole.

NOTE: The deadline to file for lead plaintiff in this class action is August 17, 2018. You must file an application to be appointed lead plaintiff prior to this deadline in order to be considered by the Court. Typically, the plaintiff or plaintiffs with the largest losses are appointed lead plaintiff.

In order to identify your potential exposure to the alleged fraud during the time in question, you may wish to perform an analysis of your transactions in TAL’s ADS using court approved loss calculation methods.

Recently Filed Cases

Listed below are recently filed securities class action cases being monitored by us, along with the class period and the deadline to file a motion to be appointed as the Lead Plaintiff in the action.  Please contact us if you would like an LK report for any of these cases:

About Us

Levi & Korsinsky is a leading securities litigation firm with a hard-earned reputation for protecting investors’ rights and recovering losses arising from fraud, mismanagement and corporate abuse.  With thirty attorneys and offices in New York, Connecticut, California and Washington D.C., the firm is able to litigate cases in various jurisdictions in the U.S., England, and in other international jurisdictions.

Levi & Korsinsky provides portfolio monitoring services for high-net worth investors and institutional clients.  Our firm also assists investors in evaluating whether to opt-out of large securities class actions to pursue individual claims.

For additional information about this case or our institutional services, please contact us.