Pomerantz Appointed Lead Counsel in Zhangmen Education Securities Litigation

On February 11, 2022, U.S. District Judge J. Paul Oetken of the Southern District of New York appointed Pomerantz LLP as Lead Counsel on behalf of Yanhong Chen, the Lead Plaintiff in Bannerjee v. Zhangmen Education Inc., 21-cv-9634 (S.D.N.Y.), a securities action brought on behalf of a class of defrauded investors concerning allegations that Zhangmen Education Inc.’s (“Zhangmen” or the “Company”) Offering Documents for its June 2017 IPO failed to disclose known risks related to impending new regulatory reforms in China that were reasonably likely to have a material adverse effect on the Company's business and financial performance.

Zhangmen is an online education platform that provides personalized online tutoring to more than 3 million K-12 students in China.

Allegations against Zhangmen include that: (i) the Company’s Offering Documents failed to disclose that regulatory authorities in China were poised to implement sweeping reforms on the private education industry, including prohibitions on profit-making and capital-raising; (ii) the foregoing was likely to have a material adverse effect on the Zhangmen's business, performance and profits; and (iii) as a result for the foregoing, the Company's statements regarding historical financial performance, market demand, and industry trends were incomplete and misleading.

On June 8, 2021, Zhangmen conducted its IPO, selling 4,166,450 American Depositary Shares (“ADSs”) priced at $11.50 per ADS. 

Then, on July 23, 2021—less than two months after the IPO—China 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 China. 

On November 19, 2021, Zhangmen announced that its auditor, Deloitte Touche Tohmatsu Certified Public Accountants LLP, had voluntarily resigned.

In the five months following its IPO, the price of Zhangmen ADSs plummeted to less than $2 per ADSs, more than 87%below the IPO price, closing at $1.47 per ADS on November 19, 2021.