Default shell not being selected with useradd

This is a known bug in Ubuntu's useradd (added by a Ubuntu-specific patch). It ignores all the settings specified in /etc/default/useradd...

The workaround, as indicated in maulinglawns' answer, is to use adduser instead, which is the recommended tool for adding non-system users in Debian derivatives.

Oddly enough, this happened to me too yesterday on a server running Ubuntu 16.04 LTS.

I have no concrete answer as to why this happens, but here is a quick solution that worked for me:
Don't use useradd, use adduser instead!

DESCRIPTION

adduser and addgroup add users and groups to the system according to command line options and configuration information in /etc/adduser.conf. They are friendlier front ends to the low level tools like useradd, groupadd and usermod programs, by default choosing Debian policy conformant UID and GID values, creating a home directory with skeletal configuration, running a custom script, and other features.

As for sudo, you have to log out that user — and then log back in — for the new group settings to have an effect.

Here's a good link on useradd vs adduser.