New York’s Bernstein Liebhard LLP and Rosen Law Firm, L.A.-Pennsylvania firm Schall Law, and the Collinsville Police Pension Board, at least, are filing class action lawsuits against Warner Bros. Discovery (WBD) on behalf of that company’s investors. Investors who have seen WBD stock price drop more than 50% since its first day of trading after the companies’ merger in April.
The filings are all similar in nature, and argue that at the time of the WarnerMedia-Discovery merger both companies knew or had access to adverse information concerning operations of WarnerMedia while it was still owned by AT&T.
Among the claims, the filings argue that WarnerMedia’s HBO Max streaming business had a high churn rate which made the business not viable unless that rate was reversed. Another common claim is that AT&T was overinvesting in streaming content without sufficient concern for return on investments and that Warner’s business plan to grow the number of HBO Max subscribers was formulated without regard to cost or profitability.
Finally, and perhaps most eye-catching, the suits claim that at the time of the merger, Warner overstated the number of HBO Max subscribers by as many as 10 million by including AT&T customers who had received bundled access to HBO Max, but had not signed onto the service.
According to Bernstein Leibhard:
The adverse information was not disclosed to Discovery shareholders in the Registration Statement or Prospectus or otherwise prior to the effective date of the merger. When the true details entered the market, the lawsuit claims that investors suffered damages.
From April 11, 2022 – the first trading day after completion of the merger – to September 23, 2022 – the date prior to filing of the complaint – WBD’s market price fell by 52.4%, from $24.78 to $11.79 per share. According to Bernstein Leibhard, that drop came as “the market became aware of the foregoing misrepresented and omitted facts.”