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Zhangmen Education, Inc.


The law firm of Kirby McInerney LLP announces that a class action lawsuit has been filed in the U.S. District Court for the Southern District of New York on behalf of those who acquired Zhangmen Education Inc (“Zhangmen Education” or the “Company”) (NYSE: ZME) American Depositary Shares (“ADSs”) in or traceable to Zhangmen Education’s initial public offering conducted on or about June 8, 2021 (“IPO”), pursuant to the IPO prospectus (the “Prospectus”) and Form F-1 registration statement, as amended (together with the Prospectus, the “Registration Statement”). Investors have until January 18, 2022 to apply to the Court to be appointed as lead plaintiff in the lawsuit.
 
Zhangmen Education, based in Shanghai, People’s Republic of China (“PRC”), is an education company focused on providing personalized online courses to K-12 students in China.
 
On July 23, 2021, less than two months after the IPO, PRC unveiled a sweeping overhaul of its education sector, banning companies that teach the school curriculum from making profits, raising capital, or going public. These drastic measures effectively ended any potential growth in the for-profit tutoring sector in PRC. On this news, Zhangmen Education’s ADS price declined by $3.36 per ADS, or approximately 35.2%, from $9.54 per ADS to close at $6.18 per ADS on July 23, 2021.
 
On July 26, 2021, Zhangmen Education issued a release providing an update on the new PRC policies, admitting among other things that Zhangmen Education expected “the Guidelines to have material impacts on our existing business operations, financial condition and corporate structure.” On this news, Zhangmen Education’s ADS price declined by $1.21 per ADS, or approximately 19.6%, from $6.18 per ADS to close at $4.97 per ADS on July 26, 2021.
 
On August 25, 2021, Zhangmen Education issued a press release providing a further update on similar policies implemented by the Shanghai government and the implications for Zhangmen Education’s business, stating for example that: (a) “No new provider of after-school tutoring services on academic subjects in China’s compulsory education system (‘Academic AST’) will be approved, while existing Academic AST providers shall be subject to review and re-registration as non-profit organizations”; (b) “Tuition fees for Academic AST shall follow the guidelines from the government to prevent any excessive charging or excessive profit-seeking activities”; and (c) “AST advertising shall be subject to enhanced oversight.” On this news, Zhangmen Education’s ADS price declined by $0.14 per ADS, or approximately 4.2%, from $3.37 per ADS to close at $3.23 per ADS on August 25, 2021.
 
On November 19, 2021, Zhangmen Education announced that its auditor, Deloitte Touche Tohmatsu Certified Public Accountants LLP, had voluntarily resigned. On this news, Zhangmen Education’s ADS price declined by $0.09 per ADS, or approximately 5.8%, from $1.56 per ADS to close at $1.47 per ADS on November 19, 2021.
 
The lawsuit alleges that the IPO Registration Statement failed to disclose that: (a) PRC authorities were in the process of implementing sweeping new regulatory reforms on the private education industry in China including, among others, prohibitions on: (i) profit-making by private education companies, (ii) engaging in core-curriculum tutoring on weekends and vacations, and (iii) capital-raising by companies like Zhangmen Education; (b) the known risks, events, and uncertainties noted in the Registration Statement were reasonably likely to have a material adverse effect on Zhangmen Education’s business; and (c) based on the foregoing, the statements in the Registration Statement concerning Zhangmen Education’s historical financial performance, market demand, and industry trends were materially incomplete, inaccurate, and misleading.
 

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