Hagens Berman Sobol Shapiro expanded its securities investigation into Alignment Healthcare after a former executive alleged the company inflated adjusted EBITDA by misclassifying expenses. Shares have fallen nearly 45 percent in the past month following disappointing second-quarter guidance.
Hagens Berman Sobol Shapiro expanded its securities investigation into Alignment Healthcare after whistleblower allegations and weak second-quarter guidance sent shares down 45 percent in a month.
"We are investigating whether the company misled the market regarding its true financial trajectory and internal health," Reed Kathrein, the Hagens Berman partner leading the investigation, said.
The probe centers on a complaint from the company's former chief transformation officer, who alleged Alignment misclassified operating expenses as capital expenditures, inflating adjusted EBITDA for 2024 and 2025. Management disclosed on the July 30 earnings call that only about 30 percent of full-year adjusted EBITDA is expected in the second half, down from 40 percent a year earlier.
Shares closed at $16.35 on July 31, down 12 percent, giving the company a market cap of $3.3 billion. The stock has lost nearly half its value in the past month as investors digested the guidance shift and the investigation's implications for executive compensation tied to the allegedly inflated metrics.
The whistleblower, who worked at Alignment from 2019 to 2025 and most recently served as chief transformation officer, said the expense misclassification boosted key performance metrics linked to both the company's stock price and executive pay. Hagens Berman first opened its investigation on July 23, when shares fell 4 percent to $19.96 with a market cap of $4.1 billion.
Alignment's management said it plans to reinvest recent outperformance into clinical infrastructure and market expansion for 2027 and 2028, which drove the downward revision to near-term profitability expectations. Full-year revenue guidance was adjusted, though the company did not disclose specific revised figures.
The Medicare Advantage sector has faced heightened regulatory scrutiny over the past year, with the Centers for Medicare and Medicaid Services tightening risk-adjustment rules and several major carriers reporting elevated medical cost trends. Alignment's challenges come as the sector navigates these headwinds alongside rising utilization among seniors.
The investigation raises questions about internal controls at the Orange, California-based Medicare Advantage provider, a sector where peers such as UnitedHealth Group and Humana also face scrutiny over risk-adjustment practices and medical cost trends. The firm is urging investors who suffered substantial losses to contact it, and it is also seeking whistleblowers with non-public information who could qualify for SEC rewards of up to 30 percent of any successful recovery.
The investigation could lead to regulatory penalties, litigation costs, and further erosion of investor confidence in Alignment Healthcare. Investors will watch for any SEC enforcement action and the company's response to the whistleblower allegations in the coming weeks.
This article is for informational purposes only and does not constitute investment advice.
