Wall Street interests founded the K12-virtual school concept in 2000. This business venture, financed by investors and public education funds, was operating without much controversy until The New York Times raised the question of academic benefit.
The December 12, 2011 Times report— “Profits and Questions at Online Charter Schools,"— had immediate repercussions: K12, Inc. stock [NYSE:LRN] dropped more than 20%.
Four days later Faruqi & Faruqi LLP, a securities law firm, opened a K12, Inc. probe re potential federal securities law violations. The question: Have K12, Inc. and its executives violated federal securities laws by failing to disclose material information revealed in The New York Times article?
Research on the part of The Times indicates that the K12, Inc. education model is deficient because a significant number of its virtual charter school students are not able to meet academic standards.
K12, Inc. unresolved concerns: Improper recruitment, abnormal withdrawal rates, false advertising and corporate pressure to pass students without regard to academic achievement.
Other pertinent information reported by The Times: K12, Inc. spent $26.5 million on advertising its virtual school product in 2010 and during promotional investment events, K12, Inc. estimates that it expects to generate $15 billion in potential revenue.