A recent New York Times article criticizing virtual school operator K12 Inc. appears to have sparked a lawsuit against the Herndon, Va.-based company.
The suit, filed by a K12 shareholder on Jan. 30, argues that the company’s stock traded at artificially high prices prior to the Times story, because K12 officials misinformed investors about the schools’ academic performance and business practices, which the suit alleges violates securities law.
During the week after the story’s release, from Dec. 12 to Dec. 16, the stock plunged 34.4 percent, though it has since somewhat recovered.
The Times reported that K12 Chief Executive Officer Ronald J. Packard told investors student performances on standardized tests at Devon, Pa.-based Agora Cyber Charter School exceeded those at other schools. But data showed the school’s performance to actually lag behind the state average in both reading and math, according to the Times.
