Shares of Chegg are moving lower after Andrew Left’s Citron Research, best known as a short-seller of the companies it follows, released a new report on the education company. “Based on our analysis, it appears that Chegg is operating illegally in 17 states,” Citron said in the report. It added, “Distributing any post-secondary assignment for a profit with reasonable knowledge that it will be submitted by another person for academic credit is a CRIME in many US states. Chegg believes they are exempt from this law because of their terms of service and their honor code. That is the equivalent of telling Waze you’re the passenger when getting directions. As soon as politicians and media get over the Rick Singer scandal, Chegg should not be far behind.” Citron also highlighted the insider selling going on at Chegg. “It appears as if insiders are acknowledging the risks and headwinds of the CaaS business model as insider selling is at a peak for all company insiders including the CEO who made his largest sale on record just a few days ago,” the report contends. If Chegg has its “Swiss bank account moment” and has to disclose all their clients to their respective schools, “the business model falls apart and the stock goes to $0,” Citron argues. The short-seller put an “immediate” price target of $25 on Chegg shares. The stock in morning trading is down 90c to $39.30.
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