- A new federal lawsuit alleges that K12 Inc.— a for-profit virtual education program — mislead investors by making wildly positive statements about the company and its future, only to reveal it was actually financially off-target.
The suit claims former CEO Ron Packard “reaped the rewards”: These statements reported led to “artificially inflated” stock prices, and Packard proceeded to sell 43% of his personal share of stock — raking in $6.4M — before announcing the company's financial reality in October.
- A company spokesperson denied the claims, saying Packard has been forthright about his trading, and used a 10b5-1 plan — which is an SEC-instituted plan allowing company execs to pre-rearrange trades, not based on insider information.
K12 Inc. has been quite controversial and this is not the first time investors have sued. In July, the company settled a lawsuit with a bunch of investors who claimed the company misled them about academic achievements and business practices, though K12 Inc. maintained its denial of the allegations.
What happened here is unclear. Since Packard announced he was leaving the company in January, some financial analysts say the stock trading probably had more to do with his departure than artificially inflated stock prices. The 10b5-1 plan, which Packard is using as his defense against insider trading, has skeptics who say it lacks transparency.
The company recently rebranded itself as Fuel Education.