eHealth, Inc. (EHTH) Accused of Misleading Shareholders
On January 22, 2019, eHealth issued a press release announcing its full year 2018 results, touting the Company’s “operational achievements” and its ability “to exceed revenue and EBITDA expectations for 2018.” Throughout the relevant period, eHealth continued to reaffirm the Company’s strong momentum with reports of increasing enrollment and revenue growth, each time attesting that the reports fairly represented “the financial condition and results of operations of eHealth, Inc.” Contrary to eHealth’s representations, on April 8, 2020, Muddy Waters Research published a report disclosing “eHealth’s highly aggressive accounting masks what we believe is a highly unprofitable business” and that “the key driver of growth since 2018 has been reliance on Direct Response television advertising, which attracts an unprofitable, high churn enrollee.” As a result of its findings, Muddy Waters concluded that ” management is, in our view, running a massive stock promotion.” On this news, eHealth’s stock price fell $12.82, or 12%, to close at $103.20 per share.
