We are investigating whether Progyny, Inc. (Nasdaq: PGNY) (“Progyny”) has violated federal securities laws based on a new report by Spruce Point Capital Management alleging improper revenue recognition policies.
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Why is there an investigation?
On February 7, 2023, Spruce Point Capital Management (“Spruce Point”) published a report alleging that “a lever that PGNY may be using to accelerate revenue recognition is unbilled accounts receivable and corresponding unbilled revenues,” and that by “adjusting revenues for changes in unbilled A/R, PGNY would have missed revenue expectations on six occasions and in all three quarters in 2022.”
The Spruce Point report cites a 2019 academic study by the Academy of Accounting and Financial Studies Journal that concluded that “unbilled receivables may lead either to earnings management or accounting fraud,” and that stakeholders should “carefully observe unbilled receivables.”
The Spruce Point report also alleges that “PGNY has historically understated client churn.”
Following the release of the Spruce Point report, Progyny’s stock price is down in early trading on February 7, 2023.
The Spruce Point report follows the publication of a report by Jehoshaphat Research in December 2022 alleging that Progyny “is deceiving the investor community via its financial reporting practices.”